Cryptocurrencies and oil price shocks: A NARDL analysis in the COVID-19 pandemic

Francisco Jareño; María de la O González; Raquel López; Ana Rosa Ramos

doi:10.1016/j.resourpol.2021.102281

Cryptocurrencies and oil price shocks: A NARDL analysis in the COVID-19 pandemic

Resour Policy. 2021 Dec:74:102281. doi: 10.1016/j.resourpol.2021.102281. Epub 2021 Aug 2.

Authors

Francisco Jareño¹, María de la O González¹, Raquel López¹, Ana Rosa Ramos¹

Affiliation

¹ Faculty of Economic and Business Sciences, University of Castilla-La Mancha, Albacete, Spain.

Abstract

This study explores potential non-linear and asymmetric interdependencies between oil price shocks and leading cryptocurrency returns. In addition, this research splits changes in crude oil prices into three relevant components: risk, demand, and supply shocks. By applying the NARDL methodology, this paper examines the connection between oil and cryptocurrencies in the period between November 20, 2018 and June 30, 2020, conducting a study of the first wave of the COVID-19 pandemic. Our results confirm that demand shocks show the greatest connection with the returns of the cryptocurrencies analysed. In addition, both short-term and long-term results show a greater interdependence between oil and cryptocurrencies in periods of economic turbulence, such as the SARS-CoV-2 coronavirus crisis.

Keywords: Bitcoin; COVID-19; Crude oil prices; Cryptocurrencies; NARDL.