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Article
Publication date: 19 June 2020

Yaman Omer Erzurumlu, Tunc Oygur and Alper Kirik

Considering the different motivation for the creation of each of these cryptocurrencies, the purpose of this paper is to examine whether there is a dominant external factor in the…

407

Abstract

Purpose

Considering the different motivation for the creation of each of these cryptocurrencies, the purpose of this paper is to examine whether there is a dominant external factor in the cryptocurrency world. Using a novel two-step time and frequency independent methodology, the authors examine a large scope of cryptocurrencies and external factors within the same period, and analytical framework.

Design/methodology/approach

The examined cryptocurrencies are Bitcoin, Ethereum, Ripple, Litecoin, Monero and Dash. In total, 18 external factors from 5 factor families are selected based on the mining motivation of these cryptocurrencies. The study first examines discrete wavelet transform-based (WTB) correlations, reduce the dimension and focuson relevant pairs. Selected pairs are further examined by wavelet coherence to capture the intermittent nature of the relationships allowing the most needed “Flexibility of frequency and time domains”.

Findings

Each coin appears to operate as a unique character with the exception of Bitcoin and Litecoin. There is no prominent external driver. The cryptocurrency market is not a clear substitute for a specific factor or market. Two-step WTB filtered wavelet coherence analysis help us to analyze a large number of factor without the loss of focus. The co-movements within the cryptocurrencies spillover from Ethereum to altcoins and later to Bitcoin.

Originality/value

The study presents one of the first examples of two-step WTB filtered wavelet coherence analysis. The methodology suggests an approach for simultaneous examination of large number of variables. The scope of the study provides a rather holistic view of the co-movements of external factors and major cryptocurrencies.

Details

Studies in Economics and Finance, vol. 37 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 7 February 2022

Alper Kirik, Tunc Oygur and Yaman Omer Erzurumlu

This study aims to attempt to understand the joint co-movement of bank deposit rate and its main underlying determinants (foreign exchange rate (FX) rate, cross-currency swap rate…

189

Abstract

Purpose

This study aims to attempt to understand the joint co-movement of bank deposit rate and its main underlying determinants (foreign exchange rate (FX) rate, cross-currency swap rate and implied forward rate). The authors also compare time and frequency variant approaches in this dynamic.

Design/methodology/approach

The authors examine bank deposit rates where multiple variables jointly interact, and the integration is time and frequency variant. The study applies both cointegration and wavelet coherence methods and conducts a comparative analysis. It investigates eight markets over 2005–2020 aiming to capture the impact of changing market conditions and degree of development.

Findings

The results are in line with cross-country interdependence, where we observe more robust evidence for co-movement during adverse economic conditions with higher correlation compared to other periods such as the 2007–2009 US mortgage crises, 2010–2012 Euro crises and 2019 pandemic. Moreover, wavelet analysis suggests deposit rate lags FX rate and leads cross-country swap rate. The USA arguably leads the co-movement accompanied briefly by Japan and followed closely by other developed markets and later the developing markets. Heat maps suggest clustering of countries.

Practical implications

The wavelet coherence's ability to indicate the periods and the frequencies of the relationship is essential to capture the true nature of the relationship. Such additional insight would enable the practitioners to determine the true price of the deposit rate.

Originality/value

The study captures the long suggested collective nature of three main underlying determinants of bank deposit. The results shed light on the order of dynamics in a complex bank deposit environment. Comparative analysis further highlights the valuable insight quadruple wavelet coherence provides.

Details

Journal of Economic Studies, vol. 50 no. 2
Type: Research Article
ISSN: 0144-3585

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