Dynamic correlations and volatility spillovers between stock price and exchange rate in BRIICS economies: evidence from the COVID-19 outbreak period

This paper examines the impact of COVID-19 pandemic on dynamic correlations and volatility spillovers between stock prices and exchange rates in BRIICS economies. Using volatility modelling, we demonstrate significant negative dynamic correlations and volatility spillovers between stock and exchange returns in most of the BRIICS economies. Further, the relationship strengthened during the initial days of lockdowns. Our results pass the sensitivity analysis, and hence robust. Overall, our findings indicate that there have been significant risk transfers between the two markets, during the COVID-19 outbreak, which led to decline in domestic stock returns and subsequent capital outflows thereby increasing the exchange rates.