Comparing COVID-19 With the GFC: A Shockwave Analysis of Currency Markets

24 Pages Posted: 24 Apr 2020 Last revised: 21 Mar 2022

See all articles by Samet Gunay

Samet Gunay

American University of the Middle East (AUM)

Date Written: April 20, 2020


I analyze the shockwave effect of the COVID-19 pandemic on currency markets, with a comparison to the global financial crisis (GFC), employing Kapetanios m-break unit root test, investigations of standalone risk measures—downside variance, upside risk, volatility skewness, Gaussian Value at Risk (VaR), historical VaR, modified VaR—and Diebold–Yilmaz volatility spillover analysis. Standalone risk analysis shows that the turmoil in the initial months of COVID-19 was not as severe as that in the GFC. However, examination of co-movements and volatility spillovers illustrates a different scenario. According to the results of the static connectedness measure of Diebold–Yilmaz, the shockwave of the COVID-19 pandemic in the total volatility spillover is about eight times greater than that of the GFC. Among standalone risk measures, the results closest to this finding are obtained from volatility skewness analysis. Additionally, of six foreign exchange rates, the Brazilian real and Turkish lira are the currencies experiencing the greatest increase in received volatility during the GFC and the COVID-19 pandemic, respectively. These findings suggest the severe effect of crises on emerging financial markets.

Keywords: Coronavirus, COVID-19 Pandemic, Global Financial Crisis, Foreign Exchange Markets

Suggested Citation

Gunay, Samet, Comparing COVID-19 With the GFC: A Shockwave Analysis of Currency Markets (April 20, 2020). Available at SSRN: or

Samet Gunay (Contact Author)

American University of the Middle East (AUM) ( email )

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