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The impact of geopolitical risks on foreign exchange markets: Evidence from the Russia–Ukraine war

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  • Hossain, Ashrafee T.
  • Masum, Abdullah-Al
  • Saadi, Samir

Abstract

We examine the relationship between geopolitical risks and foreign exchange markets using the Russia–Ukraine conflict as a natural experiment. Our main findings indicate that, due to intensified geopolitical risks, the conflict had a negative effect on foreign exchange rates. This adverse effect of geopolitical risks is more pronounced in countries with high reliance on Russian energy, countries with a high level of economic policy uncertainty, countries with geographic proximity to Russia and Ukraine, and countries where the degree of political rights, and freedom of political expression is elevated. Our additional analyses suggest that the Russian invasion of Ukraine has also negatively affected the return and volatility of the global equity markets.

Suggested Citation

  • Hossain, Ashrafee T. & Masum, Abdullah-Al & Saadi, Samir, 2024. "The impact of geopolitical risks on foreign exchange markets: Evidence from the Russia–Ukraine war," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011224
    DOI: 10.1016/j.frl.2023.104750
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    1. Hao, Xinlei & Ma, Yong & Pan, Dongtao, 2024. "Geopolitical risk and the predictability of spillovers between exchange, commodity and stock markets," Journal of Multinational Financial Management, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Geopolitical risks; Russia–Ukraine war; Foreign exchange markets; Global equity markets;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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