Impact assessment of the COVID-19 pandemic on financial markets

Yassine Kirat () and Djamel Kirat ()
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Yassine Kirat: University of Orléans, LEO
Djamel Kirat: University of Orléans, LEO

Economics Bulletin, 2022, vol. 42, issue 2, 667 - 677

Abstract: This article analyses the immediate consequences of the COVID-19 pandemic on financial markets in some of the hardest-hit countries. We first show that stock-market index returns reacted strongly and negatively to the COVID-19 pandemic. We then assess the impact of the demand-side accompanying economic measures, such as income support to cover salaries and debt relief for households, in mitigating this effect. Countries that introduced more generous income-support policies were better able to counter the pandemic's short-term harmful effects on financial markets. We calculate the potential country-level financial losses due to COVID-19 over the five first months of 2020 to have been between -40% and -26%. Once the mitigating effects of economic policy are taken into account, the actual financial loss is estimated at between -5% and -7% for France, Germany and the UK. These financial losses are higher elsewhere, with some exceeding -30%, especially in countries without income-support policies.

Keywords: Financial markets; Public-policy assessment; Panel data; Pandemics (search for similar items in EconPapers)
JEL-codes: G1 I1 (search for similar items in EconPapers)
Date: 2022-06-30
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