Currency jumps and crises: Do developed and emerging market currencies jump together?

•Emerging market currencies jump together, thus intensifying short-term risk.•Developed market currency jumps and cojumps are much less prevalent.•Emerging currency jumps are more severe during crisis periods.•Jumps represent a majority of emerging market currency volatility.•Macroeconomic news explains developed but not emerging market currency jumps.

Emerging market currencies tend to jump together, thus intensifying short-term risk, whereas developed market currency jumps and cojumps are much less prevalent. Emerging market currency jumps are considerably more severe, especially during crisis periods. Jumps represent a majority of emerging market currency volatility, in stark contrast to the much lower jump contribution previously documented for developed market currencies. Emerging market currency jumps and cojumps do not appear to respond to macroeconomic news announcements, a new result that is in sharp contrast to developed market currency jumps and cojumps.