A Causal Relationship Among the Financial Indicators of Bitcoin, Gold, and VIX: An Empirical Analysis of the Fragile Five

Year 2023, Issue: 39, 65 - 75, 27.12.2023

Emin Karataş , Ayyüce Memiş Karataş

https://doi.org/10.26650/ekoist.2023.39.1271842

Abstract

This research discusses the causal relationship among the exchange rates, 10-year bond yields, and Central Bank policy rates with regard to the countries known as the Fragile Five (F5) by comparing them to global indicators such as gold, Bitcoin price, and the Volatility Index (VIX). The study takes into consideration the bond yields, exchange rates, and interest rates of Türkiye, India, Indonesia, South Africa and Brazil in terms of their causal relationship with one another. The study also identifies some causal relationships among gold, bitcoin, and VIX with each other as global indicators by using the Toda Yamamoto approach to the Granger causality test. This study has arrived at the conclusion that a causal relationship exists between exchange rates and interest rates for Türkiye, Indonesia, and South Africa but not for Brazil or India. VIX is the most significant variable, as it is affected by seven different variables, including policy rates and different exchange rates. In addition, none of the variables are seen to Granger cause bitcoin’s price.

Keywords

Causality, Toda Yamamoto Analysis, Exchange Rate, Interest Rate, Bond Yield, VIX

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