Assessing the Financial Implications of COVID-19 Within the SVAR Framework for Some Asian Countries

Abstract

This article examines the structural responses of foreign exchange and equity markets to the COVID-19 pandemic in seven Asian countries over its first 4 months (31 December 2019 to 1 May 2020). Marginal effects derived from a structural vector autoregression (SVAR) model suggest that a 1% increase in incidence of COVID-19 cases significantly diminished Indonesia’s equity market returns by 4.7%, depreciated the Indian rupee against the US dollar by 4.8%, but improved equity prospects in South Korea by 4.1%. For the other financial markets, the effect of COVID-19 was found to be insignificant. Further, the impulse response analyses imply that the influence of COVID-19 on foreign exchange and equity markets is only transitory in nature. Additional SVAR analysis for India and Indonesia over recent months (2 May 2020 to 22 January 2021) showed that their financial markets remained (or became) resistant to the escalating incidence of COVID-19 inflections and deaths. JEL Code: G15

Effects of COVID-19 Pandemic on Investor Attention in Global Stock Markets: An Empirical Assessment

“…Our results suggest that governments prioritise economic stimulus through fiscal policy measures and invest in public health to help countries recover faster from the COVID-19 pandemic. These findings support the notion that lockdowns, travel bans and economic stimulus packages, all had a positive effect on the financial markets (Baldwin & di Mauro, 2020;Dasgupta et al, 2021;Goel & Dash, 2021;Narayan et al, 2021b). The positive (negative) relationship between volatility (return) and the market attention is consistent with the findings of existing market attention literature (Chen, 2017;Da et al, 2011).…”