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Covid-19 and Capital Flows: The Responses of Investors to the Responses of Governments

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  • Stefan Goldbach

    (Deutsche Bundesbank)

  • Volker Nitsch

    (Technische Universität Darmstadt)

Abstract

This paper examines the effect of national government response measures to Covid-19 on German international capital flows. Analyzing highly disaggregated monthly data from the German balance of payments statistics over the period from January 2019 through January 2021, we find that bilateral financial interactions are negatively affected by stricter containment and closure policies as well as health system policies of a partner country, while German capital flows benefit from a partner’s economic support policies. Moreover, to the extent that public interventions to fight the pandemic affect financial interactions, the adjustment mainly takes place along the intensive margin.

Suggested Citation

  • Stefan Goldbach & Volker Nitsch, 2022. "Covid-19 and Capital Flows: The Responses of Investors to the Responses of Governments," Open Economies Review, Springer, vol. 33(4), pages 751-774, September.
    • Handle: RePEc:kap:openec:v:33:y:2022:i:4:d:10.1007_s11079-021-09647-1
    DOI: 10.1007/s11079-021-09647-1
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    Cited by:

    1. Nitsch, Volker, 2022. "Covid-19 and international trade: Evidence from New Zealand," Economics Letters, Elsevier, vol. 217(C).
    2. Hongyi Chen & Peter Tillmann, 2022. "Lockdown Spillovers," MAGKS Papers on Economics 202215, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Chen, Hongyi & Tillmann, Peter, 2023. "Lockdown spillovers," Journal of International Money and Finance, Elsevier, vol. 137(C).
    4. Krystyna Brzozowska & Małgorzata Gorzałczyńska-Koczkodaj & Elżbieta Ociepa-Kicińska & Przemysław Pluskota, 2023. "The Impact of the COVID-19 Pandemic on Financial Condition and Mortality in Polish Regions," Sustainability, MDPI, vol. 15(11), pages 1-18, June.
    5. Antoine Berthou & Sebastian Stumpner, 2022. "Trade Under Lockdown," Working papers 867, Banque de France.

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    More about this item

    Keywords

    Coronavirus; pandemic;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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