Impact of fiscal stimulus on volatility: A cross-country analysis

Tiantian Gu, Anand Venkateswaran and Marc Erath

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This study investigates the short-to-medium-term impact of Covid-19-related fiscal stimulus relief packages on reducing investor uncertainty expectations in eight major economies. We use three measures of volatility to assess investor uncertainty: implied volatility, volatility index, and realized kernel volatility of ETFs in each country. The data covers a three-year period from January 2019 to December 2021. Our findings indicate an increase in all three measures of volatility in the post-Covid to pre-stimulus period, which decreases after the announcement of the stimulus packages. The results show that, on average, the stimulus announcements alleviate investor uncertainty and facilitate economic recovery. However, the effectiveness of the stimulus packages varies across countries but not across sectors. Our results remain robust to several checks, including alternate econometric specifications, such as the Arellano-Blundell-Bond estimation for dynamic panel data.

Keywords: Covid-19; Economic Uncertainty; Volatility; Stimulus; Multi-country (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531923000818
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000818

DOI: 10.1016/j.ribaf.2023.101955

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().