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Dynamic Structural Impact of the COVID-19 Outbreak on the Stock Market and the Exchange Rate A Cross-country Analysis Among BRICS Nations

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Document pages: 18 pages

Abstract: COVID-19 has impacted the economy of almost every country in the world. Ofparticular interest are the responses of the economic indicators of developingnations (such as BRICS) to the COVID-19 shock. As an extension to our earlierwork on the dynamic associations of pandemic growth, exchange rate, and stockmarket indices in the context of India, we look at the same question withrespect to the BRICS nations. We use structural variable autoregression (SVAR)to identify the dynamic underlying associations across the normalized growthmeasurements of the COVID-19 cumulative case, recovery, and death counts, andthose of the exchange rate, and stock market indices, using data over 203 days(March 12 - September 30, 2020). Using impulse response analyses, the COVID-19shock to the growth of exchange rate was seen to persist for around 10+ days,and that for stock exchange was seen to be around 15 days. The models capturethe contemporaneous nature of these shocks and the subsequent responses,potentially guiding to inform policy decisions at a national level. Further,causal inference-based analyses would allow us to infer relationships that arestronger than mere associations.

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