Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets

By Badar Nadeem Ashraf. Journal of Behavioral and Experimental Finance, 2020

669 citations recorded by the source corpus.

The outbreak of COVID-19 pandemic came as a rare, unprecedented event and governments around the globe scrambled with emergency actions including social distancing measures, public awareness programs, testing and quarantining policies, and income support packages. In this paper, we examine the expected economic impact of government actions by analyzing the effect of such actions on stock market returns. Using daily data from January 22 to April 17, 2020 from 77 countries, we find announcements of government social distancing measures have a direct negative effect on stock market returns due to their adverse effect on economic activity, while an indirect positive effect through the reduction in COVID-19 confirmed cases. Government announcements regarding public awareness programs, testing and quarantining policies, and income support packages largely result in positive market returns. Our findings have important policy implications, primarily by showing that government social distancing measures have both positive and negative economic impact.

Subfields: Economics and Econometrics, Global and Planetary Change, Modeling and Simulation

View Paper: https://www.semanticscholar.org/paper/06339b26ec533efdd794d81884e508a7cae83ab3

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Citations in the corpus

The nexus between COVID-19 fear and stock market volatility (2021, positive): “For instance, according to International Monetary Fund statistics, as a world leader in automobile exports, the Japanese economy was likely to shrink by 8% during the 2020 third quarter and later expected to expand to the new normal.”
Structural Breaks in Interactive Effects Panels and the Stock Market Reaction to COVID-19 (2021, background): “Ashraf (2020b) employs data for 77 countries.”