Tail Dependence Dynamics of Global Currency Markets and COVID-19

We explore tail-dependence across global currency markets over the short- and long-run during the COVID-19 pandemic. We resort to the quantile coherency approach of Baruník and Kley (2015) and the partial quantile coherency of Junior, Mullokandov, and Kenett (2015) and find compelling evidence for tail dependence dynamics in the global forex markets. Under a bearish market, the total dependence magnitude is slightly higher in the short-run than in the long run. However, it alters dramatically in the bullish market where it increases significantly in the long run than in the short run. We also notice persistent network clusters based on geographic proximity and market development. Furthermore, the dependence increases significantly during the pandemic episode for certain (most) currencies under the bearish (bullish) market conditions.