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Impact assessment of the COVID-19 pandemic on financial markets

Author

Listed:
  • Yassine Kirat

    (University of Orléans, LEO)

  • Djamel Kirat

    (University of Orléans, LEO)

Abstract

This article analyses the immediate consequences of the COVID-19 pandemic on financial markets in some of the hardest-hit countries. We first show that stock-market index returns reacted strongly and negatively to the COVID-19 pandemic. We then assess the impact of the demand-side accompanying economic measures, such as income support to cover salaries and debt relief for households, in mitigating this effect. Countries that introduced more generous income-support policies were better able to counter the pandemic's short-term harmful effects on financial markets. We calculate the potential country-level financial losses due to COVID-19 over the five first months of 2020 to have been between -40% and -26%. Once the mitigating effects of economic policy are taken into account, the actual financial loss is estimated at between -5% and -7% for France, Germany and the UK. These financial losses are higher elsewhere, with some exceeding -30%, especially in countries without income-support policies.

Suggested Citation

  • Yassine Kirat & Djamel Kirat, 2022. "Impact assessment of the COVID-19 pandemic on financial markets," Economics Bulletin, AccessEcon, vol. 42(2), pages 667-677.
    • Handle: RePEc:ebl:ecbull:eb-21-00897
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    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I2-P56.pdf
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    More about this item

    Keywords

    Financial markets; Public-policy assessment; Panel data; Pandemics;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • G1 - Financial Economics - - General Financial Markets

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