ABSTRACT
The events in the year 2020, especially the ravaging coronavirus (COVID-19) pandemic has further exposed the vulnerability and connectedness associated with human health and the global economy. In the United States, amid the COVID-19 pandemic, the recent political polarization, especially the sharp divide between the Republican and Democrat party has further demonstrated the heightened partisan conflict in the country. From this basis, the current study examines the time-varying Granger causality between pandemic-related health emergency, partisan conflict, and economic policy uncertainty (EPU) in the United States over period January 1996 to June 2020. While there is an evidence of common time-varying Granger causality between August 2005 and September 2006 from pandemic-related health emergency to partisan, the evidence of Granger causality from partisan conflict to pandemic is common in the period of January to May 2009. In addition, the Granger causality between partisan conflict and EPU is obviously common between February and May 2020. As a policy concern, we are of the opinion that mechanism toward diffusing the heightened political divide in the United States is essential and be pursued for the country’s economic and health sector challenges. © 2022, Academy of Economics and Finance.
ABSTRACT
This study investigates the causal relationship between the top-five cryptocurrencies and the US dollar at different levels of the return's distribution. We address this issue based on the Granger-causality in quantiles before and during the ongoing COVID-19 health crisis. The Granger causality test in mean shows a significant causal relationship between the two markets mainly during the COVID-19 pandemic period. By differentiating between markets states, the causality in quantiles test indicates evidence of causality between the US dollar and cryptocurrencies generally at the upper and lower tails of the distribution. Moreover, during the health crisis period, the US dollar loses its predictive power in favor of cryptocurrencies, which can act as good predictors and play a hedging role against the US dollar variations. Further analysis of the sign of causality indicates that each currency market's effect on the other depends on the distribution level and the sub-period. We find that the recent COVID-19 crisis has had a considerable effect on the crypto-conventional currencies’ relationship and has established a more important place for cryptocurrencies in the financial system. © 2020 Economic Society of Australia, Queensland