The impact of the Russia-Ukraine War on European Union currencies: a high-frequency analysis

Abstract

ABSTRACTThis article examines how the ongoing Ukraine-Russia war has affected the valuation of five European Union currencies: the Polish Zloty, Hungarian Forint, Czech Koruna, Swedish Krone, and Romanian Leu. Using high-frequency time series data and advanced statistical models, we analyze a 522-week period from 1 January 2013, to 24 February 2023, with 24 February 2022, as a key focal point. The Russia-Ukraine war had varying effects on the currencies of non-Eurozone countries. Poland, Hungary, and Sweden experienced significant impacts, while Czechia and Romania remained relatively stable. Our research also highlights the stability of the Euro as a reserve currency, which attracts investors during times of crisis and protects participating economies from currency fluctuations. Additionally, our analysis underscores the distinct impact of war on these currencies, influenced by their unique political, economic, and financial structures and strengths.JEL CODE: D60O40O50KEYWORDS: Exchange ratecurrencyEuropeWarBayesian Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 USD/local currency (e.g. USD/PLN) parity is implemented for every currency that is used in this study.2 To ensure the reliability and consistency of our findings, we conducted additional analyses using monthly data. These supplementary analyses reaffirm the robustness and stability of the results presented in this article.Additional informationNotes on contributorsMahmut Zeki AkarsuMahmut Zeki Akarsu is a Ph.D. candidate in economics at the University of Warsaw. His research focuses on relationships between macroeconomics factors and inequality, and how big political events affect currencies. His some papers have been published in Global Social Policy, Knowledge Economy, and Ekonomika.Orkideh GharehgozliOrkideh Gharehgozli is an assistant professor in economics at Montclair State University. She otained her Ph.D. from City University of New York. Her research focuses on applied econometrics, statistics and labor economics.