The COVID-19 pandemic haunting the transmission of the quantitative easing to the exchange rate

COVID-19 and Exchange Rates: Spillover Effects of U.S. Monetary Policy

“…The empirical results suggest evidence for the spillover effects of U.S. monetary policy for almost all countries during the during the pre-COVID-19 period, whereas they have been effective for only certain countries during the COVID-19 period. When the reasons behind the heterogeneity across countries are further investigated, the current study shows that only the exchange rates of countries that were successful in fighting against COVID-19 were subject to the spillover effects of U.S. monetary policy during the COVID-19 period, consistent with earlier studies (Haroon & Rizvi, 2020 ; Iyke, 2020 ; Mdaghri et al, 2020 ; Feng et al, 2021 ; Garg & Prabheesh, 2021 ; Aloui, 2021 ) which have shown that volatilities in exchange rates (or financial market frictions) are correlated with the country-specific developments in COVID-19 cases or deaths. Important policy implications follow regarding how the disease outbreak channel (Iyke, 2020 ; Feng et al, 2021 ) can be considered to fight against the economic and financial implications of COVID-19 through government interventions.…”

“…The magnitude of the spillover effects of U.S. monetary policy can be heterogenous across countries depending on their reaction to the COVID-19 pandemic. The literature (Haroon & Rizvi, 2020 ; Iyke, 2020 ; Mdaghri et al, 2020 ; Feng et al, 2021 ; Garg &Prabheesh, 2021 ; Aloui, 2021 ) has shown that volatilities in exchange rates (or financial market frictions) are correlated with the country-specific developments in COVID-19 cases or deaths. Therefore, it is essential to conduct a country-specific investigation of spillovers, as achieved by the current paper.…”

Economic Consequences of Covid-19 Pandemic: An Analysis of Exchange Rate Behaviour

“…Farhi and Gabaix (2016) opined that the country's exposure to the disaster risk is different and time-varying. Aloui (2021) reveals that during Covid-19, the effect of monetary policy intervention by the Eurozone government in the form of Quantitative Easing on the Euro/USD exchange rate varies over time. Islami and Welfens (2013) show that stock market dynamics also affect exchange rate because domestic stock market performance in comparison to other stock markets causes inflow and outflow of capital, leading to the fluctuation in the exchange rate.…”

“…So, at this juncture, the analysis of exchange rate behaviour is a matter of study. In this context, researchers such as Narayan (2020), Iyke (2020b), Nwosa (2021), Ozturk and Cavdar (2021), Sharma et al (2021), Feng et al (2021, Aloui (2021), Konstantakis et al (2021), Hoshikawa and Yoshimi (2021), Aslam et al (2020) and Camba and Camba (2020) have paid their attention to the impact of Covid-19 on exchange rate. Given the above scenario, the present work aims at analyzing the impact of Covid-19 measured in terms of confirmed cases, deaths, and uncertainty created by the pandemic on the exchange rate.…”

An Evaluation of Real Effective Exchange Rate Forecasting With Arch and Garch Models: The Case of Turkey

“…Thus, the exchange rate volatility increases during the Covid-19 crisis. In the unpredictable and unprecedented Covid-19 pandemic, it is crucial to understand its impact on exchange rates (Aloui, 2021). This study aims at comparing the ARCH and GARCH models in the CPI-based real effective exchange rate forecasting in Turkey during the Covid-19 pandemic.…”