An Empirical Analysis of Exchange Rate Volatility in India during COVID-19 Pandemic and Russia-Ukraine War

This study empirically examines the exchange rate volatility of India against the backdrop of two significant global events: the COVID-19 pandemic and the Russia-Ukraine war. In the wake of the COVID-19 epidemic, financial markets worldwide witnessed exceptional volatility, which prompted policymakers and investors to seek insights into its effects on exchange rates. At the same time, the escalation of conflict between Russia and Ukraine heightened concerns about the overall stability of the global economy and its potential impact on currency markets. As a result of these factors, this study focuses on the Indian perspective, and it investigates how each of these events, separately and together, have contributed to fluctuations in the exchange rate. Using daily exchange rates dataset spanning pre-pandemic, pandemic, post-pandemic and war periods, this study examined the magnitude and direction of exchange rate movements in response to these unfolding events. Furthermore, the study employed GARCH model framework to analyse the volatility dynamics of the Indian rupee against four major currencies namely US dollar, Euro, Pound and Yen. The empirical findings highlighted the immediate effects of the pandemic and geopolitical tensions and unveiled potential long-term implications for India's economic environment.