Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy
Purpose - After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the stock markets leading to a misunderstanding on the cryptocurrency market response. This paper aims to evaluate the effects of the Federal Reserve monetary...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2022-02-01
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| Series: | AJAR (Asian Journal of Accounting Research) |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/AJAR-01-2021-0004/full/pdf?title=resilience-of-islamic-cryptocurrency-markets-to-covid-19-shocks-and-the-federal-reserve-policy |
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| author | Emna Mnif Anis Jarboui |
| author_facet | Emna Mnif Anis Jarboui |
| author_sort | Emna Mnif |
| collection | DOAJ |
| description | Purpose - After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the stock markets leading to a misunderstanding on the cryptocurrency market response. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the Islamic and conventional cryptocurrency dynamics during the COVID-19 pandemic. We, specifically, examine the associate bubbles and feedbacks effects. Design/methodology/approach - This paper developed a novel methodology that detects market bubbles using the statistical indicators defined by Psychological (PSY) tests. It also investigated the effect of the Federal Open Market Committee (FOMC) announcements on conventional and Islamic cryptocurrencies compatible with Islamic laws “Shari’ah” by using the event-driven regression. Findings - The empirical results show that the FOMC announcements have a positive significant effect after one day of the event and a negative effect before two days of the announcement on the conventional cryptocurrency markets. However, the reaction of Islamic cryptocurrencies to these events is not significant except for Hello Gold after one day of the announcement. Besides, the Hello Gold and X8X cryptocurrencies present no bubbles during this period. However, Bitcoin and Ethereum markets have short-lived bubbles. Research limitations/implications - The main contribution of this study is the investigation of the response and vulnerability to pandemic shocks of a new category of cryptocurrencies backed by tangible assets. This work has practical implications as it provides new insights into trading opportunities and market reactions. Originality/value - To our knowledge, this work is the first study that compares the response of Islamic and conventional cryptocurrency markets to FOMC announcements during the COVID-19 pandemic and examines the presence of bubbles in these markets. Besides, the originality of this work is derived from the novelty of the data employed and the method used (PSY tests) in this study. |
| first_indexed | 2024-04-12T13:28:16Z |
| format | Article |
| id | doaj.art-3ead64a1d30842e6ac388f5b7f744653 |
| institution | Directory Open Access Journal |
| issn | 2443-4175 |
| language | English |
| last_indexed | 2024-04-12T13:28:16Z |
| publishDate | 2022-02-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | AJAR (Asian Journal of Accounting Research) |
| spelling | doaj.art-3ead64a1d30842e6ac388f5b7f7446532022-12-22T03:31:16ZengEmerald PublishingAJAR (Asian Journal of Accounting Research)2443-41752022-02-0171597010.1108/AJAR-01-2021-0004667925Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policyEmna Mnif0Anis Jarboui1University of Sfax, Sfax, TunisiaUniversity of Sfax, Sfax, TunisiaPurpose - After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the stock markets leading to a misunderstanding on the cryptocurrency market response. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the Islamic and conventional cryptocurrency dynamics during the COVID-19 pandemic. We, specifically, examine the associate bubbles and feedbacks effects. Design/methodology/approach - This paper developed a novel methodology that detects market bubbles using the statistical indicators defined by Psychological (PSY) tests. It also investigated the effect of the Federal Open Market Committee (FOMC) announcements on conventional and Islamic cryptocurrencies compatible with Islamic laws “Shari’ah” by using the event-driven regression. Findings - The empirical results show that the FOMC announcements have a positive significant effect after one day of the event and a negative effect before two days of the announcement on the conventional cryptocurrency markets. However, the reaction of Islamic cryptocurrencies to these events is not significant except for Hello Gold after one day of the announcement. Besides, the Hello Gold and X8X cryptocurrencies present no bubbles during this period. However, Bitcoin and Ethereum markets have short-lived bubbles. Research limitations/implications - The main contribution of this study is the investigation of the response and vulnerability to pandemic shocks of a new category of cryptocurrencies backed by tangible assets. This work has practical implications as it provides new insights into trading opportunities and market reactions. Originality/value - To our knowledge, this work is the first study that compares the response of Islamic and conventional cryptocurrency markets to FOMC announcements during the COVID-19 pandemic and examines the presence of bubbles in these markets. Besides, the originality of this work is derived from the novelty of the data employed and the method used (PSY tests) in this study.https://www.emerald.com/insight/content/doi/10.1108/AJAR-01-2021-0004/full/pdf?title=resilience-of-islamic-cryptocurrency-markets-to-covid-19-shocks-and-the-federal-reserve-policyislamic cryptocurrencymarket bubblescovid-19psy testsfomc announcements |
| spellingShingle | Emna Mnif Anis Jarboui Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy AJAR (Asian Journal of Accounting Research) islamic cryptocurrency market bubbles covid-19 psy tests fomc announcements |
| title | Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy |
| title_full | Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy |
| title_fullStr | Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy |
| title_full_unstemmed | Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy |
| title_short | Resilience of Islamic cryptocurrency markets to Covid-19 shocks and the Federal Reserve policy |
| title_sort | resilience of islamic cryptocurrency markets to covid 19 shocks and the federal reserve policy |
| topic | islamic cryptocurrency market bubbles covid-19 psy tests fomc announcements |
| url | https://www.emerald.com/insight/content/doi/10.1108/AJAR-01-2021-0004/full/pdf?title=resilience-of-islamic-cryptocurrency-markets-to-covid-19-shocks-and-the-federal-reserve-policy |
| work_keys_str_mv | AT emnamnif resilienceofislamiccryptocurrencymarketstocovid19shocksandthefederalreservepolicy AT anisjarboui resilienceofislamiccryptocurrencymarketstocovid19shocksandthefederalreservepolicy |