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Safe Haven Or Source Of Contagion? Analyzing The Mutual Influence Of Currencies, Cryptocurrencies And Gold During Market Turbulence

Author

Listed:
  • Tea Sestanovic

    (University of Split, Faculty of Economics, Business and Tourism, Department of Quantitative Methods, Split)

  • Klara Luketa

    (OTP banka d. d., Retail Credit Risk Department)

Abstract

This paper investigates the phenomenon of financial contagion and spillover effects, as well as their interconnections, focusing on the relationships between cryptocurrencies (Bitcoin and Ethereum), gold, and fiat currencies (US dollar, euro, and British pound). Using the DCC-MGARCH model over the period January 1, 2019 – January 1, 2023, the study analyzes the dynamic conditional correlations of returns, while the Kolmogorov-Smirnov (KS) test is employed to examine the presence of contagion in the context of the COVID crisis and the Ukraine war crisis. The Diebold-Yilmaz (DY) index is used to assess spillover effects. The results indicate that before the pandemic, Bitcoin and Ethereum had a weak negative correlation with the US dollar, acting as hedging assets, while during the pandemic, they became safe havens. Their correlation with the euro remained close to zero, reinforcing their role as hedging instruments. In relation to the British pound, they exhibited weak positive correlations, making them diversifiers. KS tests revealed a strong presence of contagion for cryptocurrencies and the British pound, while the DY index indicates significant volatility spillover from cryptocurrencies to all currency markets.

Suggested Citation

  • Tea Sestanovic & Klara Luketa, 2025. "Safe Haven Or Source Of Contagion? Analyzing The Mutual Influence Of Currencies, Cryptocurrencies And Gold During Market Turbulence," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 34(2), pages 519-541, november.
    • Handle: RePEc:avo:emipdu:v:34:y:2025:i:2:p:519-541
    DOI: 10.17818/EMIP/2025/23
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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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