Abstract:

In this study, it is aimed to investigate the relationship between Bitcoin prices and economic policy uncertainty (EPU), money supply (M3), and inflation using the ARDL bounds test and Toda-Yamamoto causality tests. In this context, the short- and long-term relationship between the mentioned variables was carried out for the BRIC (Brazil, Russia, India, and China) countries by using monthly data between August 2010 and December 2021. As a result of empirical analysis, it has been found that China's EPU index negatively affects Bitcoin in the long and short term. For India, the effect of the EPU index on the Bitcoin price in the long run is negative; No short-term effects were found. In Russia and Brazil, the EPU index was not found to be effective on Bitcoin. In the BRIC countries, the effect of inflation on Bitcoin is positive in the long run. The effect of M3 on Bitcoin has been positive for India in the short run and negative for Brazil in the long run. Finally, according to the causality results, there is unidirectional causality from inflation to Bitcoin in India and Brazil. For China, from inflation to Bitcoin; There is a causal relationship from Bitcoin to economic policy uncertainty. The findings will contribute to Bitcoin investors and policy makers to take initiatives and develop regulations regarding Bitcoin by considering the effects of M3, inflation and EPU.