Measuring the global economic impact of the coronavirus outbreak: Evidence from the main cluster countries

Abstract

This study measures the global economic impact of the coronavirus outbreak. This pandemic is characterized by demand and supply shocks, leading to restrictions on trade, product and service transactions, and capital flow mobility. We investigate its impact on currency markets, stock market performance, and investor fear sentiment. We employ an empirical, time-scale approach based on the continuous wavelet transform—appropriate for time-series characteristics during times of turmoil. Based on daily data for four main cluster countries (China, France, Italy, and the USA), our results show that the impact of the pandemic's evolution on the main economic indicators in China exhibits a different pattern from France, Italy, and the USA. For China, our results show that the pandemic evolution co-moves with the main economic indicators only in the short term (one week). The effect is more persistent in other countries. We also show that the main economic indicators are more sensitive to pandemic evolution assessed by the number of deaths rather than number of cases, and that currency and financial markets are affected in different timescales. These findings might assist policymakers in addressing the feedback loop between currency markets and capital flows and help investors find alternative assets to hedge against heath shocks.

What happens to the stock market during the COVID-19 pandemic? A systematic literature review

“…Olakojo et al (2021) showed that negative asymmetry (length of doom > boom) in the stock market will last longer in low-income countries (often emerging countries) than in high- and middle-income countries (usually developed countries). Third, tests in main cluster countries revealed that the stock market was more sensitive to deaths than infected cases of COVID-19 (Apergis and Apergis et al , 2020; Louhichi et al , 2021; Zoungrana et al , 2021). However, the number of cases still has a serious impact on developing countries (Hashmi et al , 2021).…”

“…Previous studies found a negative relationship between the COVID-19 fear index and their stock returns. Shear et al (2020) found that enhanced investors’ attention to the pandemic resulted in declining stock market returns, while Ding et al (2020), Deb (2021); and Louhichi et al (2021) found that market sentiment toward the pandemic had significant effects on stock price volatility. Lockdown policies are taken by the governments facing COVID-19 enhanced investor positive sentiment toward stock market returns (Chundakkadan, 2021).…”

Effects of COVID-19 on Global Financial Markets: Evidence from Qualitative Research for Developed and Developing Economies

“…This global crisis that has been described as "humanity's worst crisis since World War II" by the UN Secretary-General Antonio Guterres (France24 2020), strongly impacted different aspects of the global economy (Donthu and Gustafsson 2020;Louhichi et al 2021;Mulugeta et al 2021;Padhan and Prabheesh 2021;Wunder et al 2021;Vieira et al 2021), by nearly 2.7 trillion US dollars as estimated by Bloomberg (Bloomberg 2020). Based on the OECD Interim Economic Outlook (March 2020), the pandemic is a crucial threat to the economic growth of all countries in 2020.…”

Robots and risk of COVID-19 workplace contagion: Evidence from Italy

“…In the likely case of new outbreaks of old and new transmissible diseases, this resilience-enhancing strategy would reduce the need for extraordinary measures such as lockdowns and restrictions on personal mobility and social interactions. While these measures were necessary to bring the contagion rates under control and avoid further economic disruption ( Aum, Lee, Shin, 2021 , Kochańczyk, Lipniacki, 2021 ), they have high social and economic costs ( Gharehgozli, Nayebvali, Gharehgozli, Zamanian, 2020 , Louhichi, Ftiti, Ameur, 2021 , Mahmud, Riley, 2021 , Mandel, Veetil, 2020 , Martin, Markhvida, Hallegatte, Walsh, 2020 , Tisdell, 2020 ).…”