Asymmetric effects of geopolitical risk on major currencies: Russia-Ukraine tensions

Ahmed Bossman, Mariya Gubareva and Tamara Teplova

Finance Research Letters, 2023, vol. 51, issue C

Abstract: In a nonparametric quantile-on-quantile regression analysis, we study the asymmetric effects of the Russia-Ukraine geopolitical risk (GPR) on the seven major currencies in terms of the USD-denominated exchange rates. We find that GPR's impact on exchange rates is asymmetric, especially at low and high extremes, currency-specific, and depends on whether the country's legal system is predominantly based on common law or otherwise. Our findings signal the attractiveness of the Euro and the Swiss Franc currencies as a hedge for currency portfolios against GPR. The investment and policy implications of the findings are discussed.

Keywords: Geopolitical risk; Foreign exchange rates; Quantile causality-in-means; Quantile regression model; Quantile-on-quantile regression; Russia; Ukraine (search for similar items in EconPapers)
JEL-codes: C58 G01 G10 G11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006171

DOI: 10.1016/j.frl.2022.103440

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