Global Evidence of the COVID-19 Shock on Real Equity Prices and Real Exchange Rates: A Counterfactual Analysis with a Threshold-Augmented GVAR Model

Afees Salisu, Taofeek Ayinde, Rangan Gupta and Mark Wohar ()

No 202154, Working Papers from University of Pretoria, Department of Economics

Abstract: In this study, we offer a global perspective to the macroeconomic impacts of the COVID-19 pandemic using the multi-country Threshold-Augmented Global Vector Autoregressive Model of Chudik et al. (2020) with focus on real equity prices and real exchange rates. We document, with the generalized impulse responses that the impact of the pandemic on real equity prices is generally negative across the country groupings and the highest negative impact recorded in 2020Q2. The biggest losers among the advanced countries are the advanced Asia Pacific stock markets, while the overall losers are the emerging countries which are compensated with domestic currency appreciation. Our results appear to support the relative policy effectiveness in the emerging economies where the counterfactual analysis shows that the equity markets exhibit reversal to pre-pandemic equilibrium.

Keywords: Threshold-GVAR; financial markets; COVID-19 (search for similar items in EconPapers)
JEL-codes: C33 G15 I18 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2021-08
New Economics Papers: this item is included in nep-isf, nep-opm and nep-ore
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Journal Article: Global evidence of the COVID-19 shock on real equity prices and real exchange rates: A counterfactual analysis with a threshold-augmented GVAR model (2022)
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