Cryptocurrency Market Stress and Macroeconomic Uncertainty: A Quantile Granger Causality Approach
Abstract
This paper investigates the dynamic causal relationship between global cryptocurrency market stress and macroeconomic uncertainty using a quantile Granger non-causality test. Two major indices, the Cryptocurrency Market Stress Index (CMSI) and the Global Economic Policy Uncertainty Index (GEPU), are used to represent financial stress and uncertainty respectively. We apply the Granger causality test at various quantiles to explore the non-linear effects across different market conditions. The results indicate significant bidirectional causality at extreme quantiles, revealing that cryptocurrency stress influences uncertainty and vice versa, especially during periods of intense volatility or economic tension. The study underscores the need for policymakers and investors to monitor cryptocurrency markets closely as indicators of economic sentiment.
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