The effects of markets, uncertainty and search intensity on bitcoin returns

Forthcoming publication by Economics alum Orestis Vravosinos ’18

Orestis Vravosinos ’18 (Economics) shares his recent work on bitcoin, joint with professors Theodore Panagiotidis (University of Macedonia) and Thanasis Stengos (University of Guelph).

The paper is in press and currently available online in the International Review of Financial Analysis. It first appeared as a working paper of the Rimini Centre for Economic Analysis (RCEA).

Bitcoin has been gaining more and more attention by investors and researchers since its introduction by Nakamoto (2008). It possesses three main appealing features: (i) direct transactions without bank intermediation, (ii) low transaction fees and (iii) anonymity. The consumer base and transaction frequency in the digital currencies market and the number of businesses and organizations that accept bitcoin as a means of payment have been considerably expanding. Apart from its increasing use in transactions, literature suggests that bitcoin has some favorable characteristics as an asset.

In the paper we examine the impact of shocks in stock markets, exchange rates, gold, oil, central bank rates, internet trends and policy uncertainty on bitcoin returns employing alternative VAR and Factor- Augmented VAR (FAVAR) models and using generalized and local impulse response functions. We also use factor and principal component (PC) analysis to capture the magnitude of the effects that European, US and China-Japan markets have on bitcoin returns.

Our results suggest a significant interaction between bitcoin and traditional stock markets, a weaker with FX markets and the macroeconomy and an anemic importance of popularity measures. Lastly, we reveal the increased impact of Asian markets on bitcoin compared to other geographically-defined markets, which however appears to have waned in the last two years after the Chinese regulatory interventions. This has been accompanied by a sudden contraction of CNY’s share in bitcoin trading volume and a rapid expansion of USD’s share.


Panagiotidis, T., Stengos, T. and Vravosinos, O. (2018). The effects of markets, uncertainty and search intensity on bitcoin returns. International Review of Financial Analysis, doi: 10.1016/j.irfa.2018.11.002

UK News Shocks and Business Cycles

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.

Jorge Meliveo and Willy Scherrieble

Master’s Program:
Macroeconomic Policy and Financial Markets

Paper Abstract:

In this paper we use a structural Factor Augmented VAR (FAVAR) approach to estimate the effects of news shocks in a new institutional setting: the United Kingdom. We define news shocks as the stock price shock orthogonal to TFP that maximizes the forecast error variance of TFP at the 40 quarter horizon. We find that news shocks account for around 18 – 45% of the variance in output at business cycle frequencies. Furthermore, the predictions of our estimation are in line with the predictions of standard neoclassical business cycle theories, i.e. following a positive news shock, agents increase both consumption and leisure, hence, reducing the amount of hours worked. Our contribution is twofold: First, we enlarge the geographical investigation of the news shock literature by considering a new dataset for the UK. This is important since all major studies have exclusively focused on the US economy so far. Second, we address the problem of non-fundamentalness by comparing a VAR and FAVAR approach. We find that including factors to the VAR changes the results and generates negative co-movement between hours worked and consumption on impact. Furthermore, our results are in line with the findings of Barsky and Sims (2011) and Forni, Gambetti, and Sala (2014) for the US.

Presentation Slides:

The Credit Channel in Monetary Policy Transmission at the Zero Lower Bound. A FAVAR Approach

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

The Credit Channel in Monetary Policy Transmission at the Zero Lower Bound. A FAVAR Approach


Alexandru Barbu, Zymantas Budrys, Thomas Walsh

Master Program:


Paper Abstract:

This paper aims to provide a methodology for identifying the credit channel in US monetary policy transmission, consistent with periods at the zero lower bound. We follow Ciccarelli, Maddaloni and Peydro (2011) in identifying credit shocks through quarterly responses in the Federal Reserve’s Senior Loan Officer Survey, but augment their identification strategy in two key ways. First, we use the credit variables inside a Factor Augmented Vector Autoregression, to summarize the information contained in a set of 110 US macroeconomic and financial series. Second, we adopt the shadow rate developed by Wu & Xia (2013) as an alternative to the effective federal funds rate at the zero lower bound. We present our results through impulse response functions and carefully designed counterfactuals. We find that monetary policy shocks have considerably larger effects through the credit supply side than the credit demand side. Building counterfactual analyses, we find the macroeconomic effects arising from the supply side of the credit channel to be sizable. When focusing on the recent unconventional policies, our counterfactuals show only very modest movements in credit variables, suggesting that the positive effects of unconventional monetary policy during the crisis may not have acted strongly through the credit channels.

Read the full paper