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Global Evidence of the COVID-19 Shock on Real Equity Prices and Real Exchange Rates: A Counterfactual Analysis with a Threshold-Augmented GVAR Model

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometric & Allied Research, University of Ibadan, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Taofeek O. Ayinde

    (Department of Economics, Fountain University, Osogbo, Nigeria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Mark E. Wohar

    (College of Business Administration, University of Nebraska at Omaha, 6708 Pine Street, Omaha, NE 68182, USA)

Abstract

In this study, we offer a global perspective to the macroeconomic impacts of the COVID-19 pandemic using the multi-country Threshold-Augmented Global Vector Autoregressive Model of Chudik et al. (2020) with focus on real equity prices and real exchange rates. We document, with the generalized impulse responses that the impact of the pandemic on real equity prices is generally negative across the country groupings and the highest negative impact recorded in 2020Q2. The biggest losers among the advanced countries are the advanced Asia Pacific stock markets, while the overall losers are the emerging countries which are compensated with domestic currency appreciation. Our results appear to support the relative policy effectiveness in the emerging economies where the counterfactual analysis shows that the equity markets exhibit reversal to pre-pandemic equilibrium.

Suggested Citation

  • Afees A. Salisu & Taofeek O. Ayinde & Rangan Gupta & Mark E. Wohar, 2021. "Global Evidence of the COVID-19 Shock on Real Equity Prices and Real Exchange Rates: A Counterfactual Analysis with a Threshold-Augmented GVAR Model," Working Papers 202154, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202154
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    Cited by:

    1. Tabash, Mosab I. & Sheikh, Umaid A. & Roubaud, David & Galariotis, Emilios & Grebinevych, Oksana, 2025. "Do forward exchange rate conditions intervene with the transmission of stock market volatility and COVID-19 impact? Sign and location-based asymmetries," Research in International Business and Finance, Elsevier, vol. 77(PB).
    2. Ruipeng Liu & Mawuli Segnon & Rangan Gupta & Elie Bouri, 2021. "Conventional and Unconventional Monetary Policy Rate Uncertainty and Stock Market Volatility: A Forecasting Perspective," Working Papers 202178, University of Pretoria, Department of Economics.
    3. Naveed, Hafiz Muhammad & HongXing, Yao & Memon, Bilal Ahmed & Ali, Shoaib & Alhussam, Mohammed Ismail & Sohu, Jan Muhammad, 2023. "Artificial neural network (ANN)-based estimation of the influence of COVID-19 pandemic on dynamic and emerging financial markets," Technological Forecasting and Social Change, Elsevier, vol. 190(C).

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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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