Economic policy uncertainty and its effect on stocks, bitcoin and the gold markets

Purpose Economic Policy Uncertainty (EPU) introduces significant challenges to business decision-making, often dampening investment activity and exerting adverse effects on financial markets. Beyond equities, EPU may also influence alternative asset classes such as gold and cryptocurrencies. This study aims to investigate the impact of EPU on the US stock, gold and Bitcoin markets and these asset classes on each other using monthly time series data from October 2015 to September 2025. Design/methodology/approach For this study, a vector autoregressive (VAR) framework is initially developed using monthly time series data from October 2015 to September 2025. The time series properties of the data are first examined to assess stationarity, followed by cointegration tests to evaluate the presence of long-run relationships among the variables. As all series are stationary in first differences and the null hypothesis of no cointegration is rejected, a Vector Error Correction Model (VECM) is subsequently used. Findings The estimated impulse response functions and variance decomposition results from the VECM reveal that EPU exerts a negative effect on the stock market while positively influencing gold prices, indicating that investors use gold as a hedge against heightened policy uncertainty. In contrast, the effect of EPU on the Bitcoin market is comparatively weaker than that observed in the stock and gold markets. Originality/value This study addresses a notable gap in the literature by jointly examining the effects of economic policy uncertainty (EPU) on stock, gold and Bitcoin prices within a unified analytical framework. Using U.S. data, the paper investigates how EPU influences these asset classes during periods of heightened uncertainty and explores the cross-market dynamics through which price movements in one market affect the others. Additionally, the study analyzes the feedback effects of the stock market on EPU, as well as on gold and Bitcoin markets, thereby offering a more comprehensive understanding of the interconnected relationships among traditional and alternative assets under uncertainty.