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Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector

Md. Bokhtiar Hasan (), Masnun Mahi (), Tapan Sarker and Md. Ruhul Amin ()
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Md. Bokhtiar Hasan: Department of Finance and Banking, Islamic University, Kushtia 7003, Bangladesh
Masnun Mahi: Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur 50603, Malaysia
Md. Ruhul Amin: Department of Finance and Banking, Islamic University, Kushtia 7003, Bangladesh

Journal of Risk and Financial Management, 2021, vol. 14, issue 5, 1-18

Abstract: In this study, we examine the effect of the COVID-19 pandemic on global economic activity, the stock market, and the energy sector considering the sizable damaging impacts in these crucial aspects. Our results, based on the structural vector autoregression (SVAR) model for the data from 21 January 2020, to 26 February 2021, indicate that the COVID-19 cases significantly and negatively impact all the endogenous variables such as Baltic dry index (BDI), MSCI world index (MSCI), and MSCI world energy index (MSCIE). Our results also reveal that of the three variables, the stock markets indices (MSCI and MSCIE) are comparatively more affected by COVID-19 cases. The findings imply that the stock markets are more sensitive to the COVID-19 pandemic than the real economy. The results further indicate that of the three variables, the MSCIE index is the most affected by COVID-19 due to two factors: one is the dwindling power consumption caused by COVID-19 and the other is the decline in oil price because of the Russia–OPEC price war. Our findings enhance the understanding of the spillover impacts of the global health crisis on economic activity, the stock market, and the energy sector. Moreover, our study offers insights for policymakers and governments into the relationship dynamics of COVID-19 that would help them be more cautious in taking preventive measures against the health crisis to save the economy, the stock market, and the energy sector from falling into a more deepened crisis.

Keywords: COVID-19; coronavirus; pandemic; economic activity; stock market; energy sector; spillover; structural VAR (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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