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Policy responses to COVID-19 and stock market reactions - An international evidence

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  • Deng, Tianjie
  • Xu, Tracy
  • Lee, Young Jin

Abstract

The COVID-19 pandemic has caused escalating levels of business, economic and societal uncertainty and created extensive disruptions around the world. Policymakers have responded with a variety of measures to combat this unprecedented crisis. This paper investigates the stock market reactions to the national policy responses. We focus on the two influential policy actions: the nationwide lockdown order aiming to slow down the spread of the Coronavirus, and the interest rate cut policy aiming to minimize the negative economic impact of the pandemic. The Difference-In-Difference method is employed to conduct a cross-country analysis. We find that both policy actions have a significant and positive impact on the stock market performance. We also document a larger stock market reaction to the announcement of an interest rate cut policy than that of a lockdown order.

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  • Deng, Tianjie & Xu, Tracy & Lee, Young Jin, 2022. "Policy responses to COVID-19 and stock market reactions - An international evidence," Journal of Economics and Business, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:jebusi:v:119:y:2022:i:c:s0148619521000618
    DOI: 10.1016/j.jeconbus.2021.106043
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    More about this item

    Keywords

    COVID Pandemic; Macroeconomic Policy; Monetary Policy; International Financial Markets;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G1 - Financial Economics - - General Financial Markets

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