COVID-19 and Financial Markets: A Panel Analysis for European Countries

Jens Klose and Peter Tillmann

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In order to fight the economic consequences of the COVID-19 pandemic, monetary and fiscal policy announced a large variety of support packages which are often unprecedented in size. In this paper, we provide an empirical analysis of the responses of European financial markets to these policy announcements. The key contribution is a very granular set of policy announcements, both at the national and the European level. We also differentiate between the first announcement in a series of policies and the subsequent announcements because the initial steps were often seen as bad news about the state of the economy. In a panel model we find that monetary policy, in particular through asset purchases, is effective in supporting the real economy and easing the pressure on governmental finances. Across all subsets of polices, it seems that monetary policy is more effective in supporting the stock market than national fiscal policy, though markets clearly distinguish between different types of policies.

Keywords: event study; announcements; fiscal policy; monetary policy; European Monetary Union (search for similar items in EconPapers)
JEL-codes: E44 E52 E62 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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http://www.uni-marburg.de/fb02/makro/forschung/mag ... 20/25-2020_klose.pdf First 202025 (application/pdf)

Related works:
Journal Article: COVID-19 and Financial Markets: A Panel Analysis for European Countries (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202025

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