Dynamic correlations and volatility spillovers between stock price and exchange rate in BRIICS economies: evidence from the COVID-19 outbreak period

This paper examines the impact of COVID-19 pandemic on dynamic correlations and volatility spillovers between stock prices and exchange rates in BRIICS economies. Using volatility modelling, we demonstrate significant negative dynamic correlations and volatility spillovers between stock and exchange...

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Bibliographic Details
Published in:Applied economics letters 2022-05, Vol.29 (8), p.738-745
Main Authors: Rai, Karan, Garg, Bhavesh
Format: Article
Language:English
Subjects:
Coronaviruses
COVID-19
Economic analysis
Economic theory
Economics
Exchange rates
Foreign exchange rates
Pandemics
Prices
Sensitivity analysis
Spillover effect
stock market
Stock prices
Volatility
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Summary:This paper examines the impact of COVID-19 pandemic on dynamic correlations and volatility spillovers between stock prices and exchange rates in BRIICS economies. Using volatility modelling, we demonstrate significant negative dynamic correlations and volatility spillovers between stock and exchange returns in most of the BRIICS economies. Further, the relationship strengthened during the initial days of lockdowns. Our results pass the sensitivity analysis, and hence robust. Overall, our findings indicate that there have been significant risk transfers between the two markets, during the COVID-19 outbreak, which led to decline in domestic stock returns and subsequent capital outflows thereby increasing the exchange rates.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2021.1884835