Shaking Stability: COVID-19 Impact on the Visegrad Group Countries’ Financial Markets

Katarzyna Czech, Michał Wielechowski, Pavel Kotyza, Irena Benešová and Adriana Laputková
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Katarzyna Czech: Department of Econometrics and Statistics, Institute of Economics and Finance, Warsaw University of Life Sciences-SGGW, Nowoursynowska 166, 02-787 Warsaw, Poland
Michał Wielechowski: Department of Economics and Economic Policy, Institute of Economics and Finance, Warsaw University of Life Sciences-SGGW, Nowoursynowska 166, 02-787 Warsaw, Poland
Irena Benešová: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamýcka 129, 16500 Prague, Czech Republic
Adriana Laputková: Department of Languages, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamýcka 129, 16500 Prague, Czech Republic

Sustainability, 2020, vol. 12, issue 15, 1-19

Abstract: The recent outbreak of the coronavirus pandemic has made a significant impact on the global financial markets. The aim of this paper is to assess the short-term reaction of the Visegrad countries’ financial markets to the COVID-19 pandemic. The Visegrad Group is a political alliance of four Central European countries, namely Czechia, Hungary, Poland, and Slovakia. The financial assessment is based on the EUR/CZK, EUR/HUF, and EUR/PLN exchange rates and the major blue-chip stock market indices, that is Prague PX, Budapest BUX, Warsaw WIG20, and Bratislava SAX. It is evident that the ongoing pandemic has changed the expectations of the financial market participants about the future value of exchange rates in the Visegrad countries. This study indicates that, as a consequence of COVID-19, higher probability has been attached to the large depreciation of the Czech koruna (CZK), the Hungarian forint (HUF), and the Polish zloty (PLN) than to their large appreciation. Moreover, based on the TGARCH model, the positive and significant correlation between the number of reported COVID-19 cases and the exchange rates has been confirmed, implying that the ongoing pandemic has resulted in the depreciation of the Visegrad currencies. Additionally, the result of the TGARCH model reveals that there is a significant and negative link between the Visegrad stock market indices and the COVID-19 spread.

Keywords: COVID-19; coronavirus; SARS-CoV-2; Visegrad Group (V4); government response; financial markets; macroeconomic indicators; Czechia; Poland; Slovakia; Hungary (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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