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The Impact of COVID-19 on Stock Market and Exchange Rate Uncertainty in Pakistan

Author

Listed:
  • Dr Syed Ateeb Akhter Shah

    (State Bank of Pakistan)

  • Kaneez Fatima

    (University of Balochistan, Quetta)

  • Mannan Zaheer

    (State Bank of Pakistan)

Abstract

t This paper examines the impact of coronavirus (COVID-19) on exchange rate (EXU) and stock market uncertainty (SMU) in Pakistan while controlling for the effects of interest rate and policy interventions by the Government and the Central bank to combat the pandemic. We employ the vector autoregressive (VAR) model over a sample period ranging from February 25, 2020 to May 6, 2021. We find that a shock to total daily coronavirus cases in Pakistan has a positive and significant impact on both the EXU and SMU. However, this impact is short-lived which may be attributed to a timely policy response and risk-averse nature of investors in Pakistan. This result is aligned with a vast literature on pandemics and investors uncertainty and remains robust to several robustness check exercises.

Suggested Citation

  • Dr Syed Ateeb Akhter Shah & Kaneez Fatima & Mannan Zaheer, 2021. "The Impact of COVID-19 on Stock Market and Exchange Rate Uncertainty in Pakistan," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 16(2), pages 96-108, July-Dece.
    • Handle: RePEc:aho:journl:v:16:y:2021:i:2:p:96-108
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    File URL: https://ir.iba.edu.pk/businessreview/vol16/iss2/6/
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    Cited by:

    1. Ghulam Ghouse & Muhammad Ishaq Bhatti & Muhammad Hassam Shahid, 2022. "Impact of COVID-19, Political, and Financial Events on the Performance of Commercial Banking Sector," JRFM, MDPI, vol. 15(4), pages 1-18, April.

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