Following the leaders? A study of co-movement and volatility spillover in BRICS currencies

Suman Das and Saikat Sinha Roy

Economic Systems, 2023, vol. 47, issue 2

Abstract: The paper investigates return co-movement and volatility spillover among the currencies of Brazil, Russia, India, China, and South Africa (the BRICS member countries) and four major developed countries from April 2006 to October 2019. Using Bloomberg daily data on exchange rates, the study employs a flexible multivariate generalized autoregressive conditional heteroskedasticity (MGARCH)–dynamic conditional correlation (DCC) model and a vector autoregressive (VAR)–based spillover index, as the empirical strategy. Along with evidence of exchange rate volatility in BRICS currencies, among which the Russian ruble and the Chinese yuan are explosive, the econometric estimation results show the presence of significant return co-movement and volatility spillover among the foreign exchange markets across different countries. The currency markets in developed countries, as leaders, are found to transmit volatility mostly to BRICS currency markets, which are net receivers. The degree of spillover, however, varies across countries, with Brazil and Russia passing on volatility to the developed countries whereas India, China, and South Africa receive volatility from their developed counterparts.

Keywords: BRICS; Exchange rate; Volatility; MGARCH–DCC model; Return co-movement; VAR-based spillover index (search for similar items in EconPapers)
JEL-codes: C32 C58 E44 F31 F41 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362522000425
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:47:y:2023:i:2:s0939362522000425

DOI: 10.1016/j.ecosys.2022.100980

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().