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How Chinese monetary policy impacts cryptocurrency return: The role of economic policy uncertainty

By Truong Minh Loc (VNP 24)

Supervisor: Dr. Nguyen Vu Hong Thai

Abstract

Analyses on the cryptocurrency price formation have recently raised attention among academic studies. However, there is still a huge research gap raised from the lack of theoretical frameworks on this topic. The contribution of this thesis is threefold. First, we augment monetary theories into the cryptocurrency context, including Money Demand Theory (MD) and Monetary Transmission Mechanism (MTM). Second, based on the constructed theoretical framework, we explain the asymmetric effect of a monetary policy on cryptocurrency by a set of empirical models. Third, we identify the role of the Economic Policy Uncertainty index (EPU), established by Baker, Bloom, & Davis (2016), in the relationship between monetary policy and cryptocurrency. Our empirical results conclude that a higher EPU is expected to weaken the impacts from a tightening monetary policy on cryptocurrency market.

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