Time-based Connectedness Between Cryptocurrencies and ASEAN Fiat Currencies: A TVP-VAR Approach

As cryptocurrencies have increasingly integrated into other financial markets and have been acknowledged as a mainstream asset class, studies examining the interlinkages of the cryptocurrency market with the conventional fiat currency markets have gained significance. This article examines the connectedness of a basket of ASEAN currencies (Indonesian rupiah, Philippine peso, Thai baht and Vietnamese dong) with the market leaders of cryptocurrencies (Bitcoin and Ethereum). The time-varying parameter vector autoregression approach is employed on the daily closing prices of the variables for the rolling period of the past 60 months (1 January 2019–31 December 2023) to study the time-based total and pairwise connectedness and identify the net transmitters and net receivers of volatilities. The findings of the article reveal little connectedness between the two markets for the most part of the time period considered. The study’s contribution is important for the investors to better understand the diversification opportunities and offers insights to the policymakers to formulate cryptocurrency as well as fiat currency–related policies.