Policy responses to COVID-19 and stock market reactions - An international evidence

Tianjie Deng, Tracy Xu and Young Jin Lee

Journal of Economics and Business, 2022, vol. 119, issue C, No S0148619521000618

Abstract: The COVID-19 pandemic has caused escalating levels of business, economic and societal uncertainty and created extensive disruptions around the world. Policymakers have responded with a variety of measures to combat this unprecedented crisis. This paper investigates the stock market reactions to the national policy responses. We focus on the two influential policy actions: the nationwide lockdown order aiming to slow down the spread of the Coronavirus, and the interest rate cut policy aiming to minimize the negative economic impact of the pandemic. The Difference-In-Difference method is employed to conduct a cross-country analysis. We find that both policy actions have a significant and positive impact on the stock market performance. We also document a larger stock market reaction to the announcement of an interest rate cut policy than that of a lockdown order.

Keywords: COVID Pandemic; Macroeconomic Policy; Monetary Policy; International Financial Markets (search for similar items in EconPapers)
JEL-codes: E5 F3 F4 G1 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:119:y:2022:i:c:s0148619521000618

DOI: 10.1016/j.jeconbus.2021.106043

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