Changing efficiency of BRICS currency markets during the COVID-19 pandemic

Andrew Phiri

Economic Change and Restructuring, 2022, vol. 55, issue 3, No 15, 1673-1699

Abstract: Abstract This paper studies the information efficiency of BRICS currency markets during the COVID-19 pandemic using daily data spanning 3rd February 2020–31st August 2021. In our preliminary analysis, which consists of tests for random walk and martingale processes, we provide evidence of time-varying weak-form market efficiency in the currency markets. In our main empirical analysis, we use wavelet coherence tools to examine the time–frequency relationship between COVID-19 death rates and BRICS currency returns, and we find higher frequency components dominate periods of panic and financial turmoil. However, subsequent to government intervention in financial markets and the more recent rollout of mass vaccination programmes, we find that higher frequency oscillations disappear, and only very low-frequency co-movements remain. Important academic, market and policy implications derived from our study are discussed.

Keywords: Coronavirus; Currency returns; Efficient market hypothesis (EMH); Adaptive market hypothesis (AMH); Emerging markets; Wavelet coherence (search for similar items in EconPapers)
JEL-codes: C02 C22 E44 F31 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10644-021-09363-3

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