The Impact of the War in Ukraine on European Union Currencies: A High-Frequency Analysis

Abstract

This study investigates the response disparity of five regional European currencies amidst the ongoing Ukraine-Russia conflict and examines the profound impact of this conflict on the value of five prominent European Union currencies - the Polish Zloty, the Hungarian Forint, the Czech Koruna, the Swedish Krone, and the Romanian Leu. Utilizing high-frequency time series data and an advanced Bayesian Structural Time Series Model, we develop counterfactual units for these currencies to gain insights into how the Eurozone nations have been affected. Our study covers a comprehensive period of 522 weeks, commencing from February 24th, 2022, ensuring a thorough understanding of the impact of the Ukraine-Russia conflict on these European currencies. Our findings suggest that the Euro's stability and reserve currency status are valuable during crises, serving as a safe haven for investors and shielding countries' economies from currency fluctuations.

Keywords: Excahnge Rate, Currency, Europe, War

JEL Classification: D60, O40, O50