New Evidence on Spillovers Between Crypto Assets and Financial Markets
Author | : Roshan Iyer |
Publisher | : International Monetary Fund |
Total Pages | : 62 |
Release | : 2023-09-29 |
ISBN-10 | : 9798400256622 |
ISBN-13 | : |
Rating | : 4/5 (22 Downloads) |
Book excerpt: We analyze returns and volatility spillovers among a representative set of crypto and financial assets. The magnitude of spillovers increases during periods of heightened turbulence due to negative economic-financial news, crypto market events, or exogenous shocks. There is evidence of increasing spillovers over time, with a peak during the COVID-19 pandemic, implying growing interdependence. Crypto assets predominantly transmit spillovers to financial markets, though reversals occur during periods of financial stress. The increased correlation during risk-off episodes suggests that crypto assets could serve as important conduits for financial market shocks, generating financial stability risks.