The COVID-19 pandemic has affected different sectors of the economy in an unprecedented way, and this article is an attempt to analyze the economic effect of the outbreak in India. However, before we assess the economic cost associated with the pandemic, we economists fully consider the outbreak as a human tragedy. There has not been any econometric technique that can account the countless human sufferings that the crisis has brought. Through this article, we address several important research questions and demonstrate India's strength to stay immune to combat COVID-19 pandemic. The research questions are as follows. First, what will be the effect of COVID-19 on the Indian economy and how does it affect the different sectors of the economy? Second, how does the pandemic affect the bilateral trade relation between India and China? Third, we question the role of the public health system in dealing with the outbreak of the virus in India. This article also presents the growth projection of the Indian economy by different economic agents. We finally conclude the article by mentioning a few policy recommendations for the Indian economy. 1 | INTRODUCTION The outbreak of COVID-19, which was initially conceived as a Chinese-centric shock, has now been understood to be a global crisis. With the number of cases increasing rapidly, the World Health Organization (WHO) on March 12, declared COVID-19 as a global pandemic. The unprecedented outbreak of the virus has brought considerable human sufferings to every sphere of human lives. In addition to the public health emergency, the crisis has unpredictably hit the world economy. The operations of the world economy have substantially come to a halt. The economically challenging measures adopted across the countries such as bans on traveling, imposing restrictions on labor mobility, shutting down manufacturing companies, and sharp cutbacks in service sector activities to contain the disease, have produced enormous adverse effects on the economy. However, an accurate empirical assessment about the size and persistence of the pandemic and its likely impact on the world economy is yet unknowable. The earlier pandemics (SARS, Avian Flu, MERS) had affected particularly those countries that were economically less dominant; moreover, the magnitude of the previous pandemics was much smaller than COVID-19. The effect of this virus is, however, economically different. The number of infections is frequently changing on an hourly basis. The top most affected economies out of the outbreak are United States, Italy, China, Spain, France, United Kingdom, and Germany. These economies accidentally happen to be the world's largest economies as well. G7 economies have witnessed exponential growth in the number of confirmed cases. These economies account 60% of the world's demand and supply, 65% of the world's manufacturing, and around 40% of manufacturing exports (Baldwin & di Mauro, 2020). Therefore, there is a saying going around that while these large economies sneeze, the rest of the world will ...
Purpose The purpose of this paper is to investigate the effects of exchange rate volatility, oil price return and COVID-19 cases on the stock market returns and volatility for selected emerging market economies. Additionally, this study compares the market performance in the emerging economies during the COVID-19 pandemic with the pre-COVID and global financial crisis (GFC) period. Design/methodology/approach The authors apply the arbitrage pricing theory to model the risk-return relationship between the risk-based factors (exchange rate volatility and COVID-19 cases) and stock market returns. By applying the exponential generalized autoregressive conditional heteroskedasticity model, the study captures the asymmetric volatility spillover from the stock markets to foreign exchange markets and vice versa. Findings Findings reveal that exchange rate volatility exerts a negative and significant effect on the market returns in Brazil (BOVESPA), Chile (S&P CLX IPSA), India (SENSEX), Mexico (S&P BMV IPC) and Russia (MOEX) during the coronavirus pandemic. Regarding the effect of oil price returns, the authors find a positive relationship between oil price and stock market returns across all the economies in the study. The market returns of Russia, India, Brazil and Peru appeared more volatile during the pandemic than the GFC period. Practical implications As the exchange rate volatility is causing higher risk and uncertainty in the stock market’s performance, the central bank’s effort to maintain a stabilizing effect on the exchange rate sale can be proven crucial for the economies under consideration. Emphasized should also be given to boost investors’ confidence in the stock market, and for this, the government policy actions in reducing the transmission of the disease are the need of the hour. Originality/value While a large volume of literature on stock market performance in times of COVID-19 has emerged from developed economies, this study adds to the literature by exploring the emerging economies’ stock market performance during the COVID-19 pandemic. Unlike previous literature, this study examines the volatility spillover between stock and exchange rate markets in the worst affected emerging economies during the crisis.
Purpose Bank competition and financial stability are often cited as important drivers of economic growth. Bank competition plays a very significant role in enhancing the efficiency and determining the stability of a financial system. However, a question of interest is whether bank competition enhances or hindrances the economic growth of a country. The purpose of this paper is to investigate the role of bank competition and financial stability on economic growth for selected South Asian economies over the period 1997–2016. Design/methodology/approach To investigate whether bank competition enhances or hinders economic growth, the author applies a two-step estimation technique. First, the author estimates bank competition using the Lerner index and adjusted Lerner index and, second, examines the joint effect of bank competition and financial stability on economic growth applying both panel regression model and system GMM techniques. Findings Empirical findings reveal that the banking sector in South Asian economies is competitive as indicated by the estimated values of Lerner and adjusted Lerner index. Moreover, the joint effect defined by the interaction between banking competition and banking stability also reveals a positive and significant impact on economic growth. This finding implies that both banking competition and banking stability are significant long-term determinants of economic growth in South Asian economies. Practical implications This paper suggests flexible banking regulation policies such as low net interest rate margins, lesser activity restrictions and entry of foreign banks along with few contestability measures to increase bank competition in South Asian countries. This is because as higher the competition, greater is the chance for efficient allocation of resources and hence economic growth. Originality/value This paper is the first of its kind that considers the joint role of bank competition and financial stability on economic growth. The application of a semi-parametric approach in the estimation of marginal cost is also a unique contribution to empirical literature.
PurposeThe paper measures the degree of bank competition in Indian banking over the period 1996–2016. Using bank-level annual data, we revisit the case of banking competitiveness during the prefinancial and postfinancial crisis and examine whether the global financial crisis alters the level of bank competition in India. Additionally, this paper addresses the misspecification issues associated with the widely used Panzar–Rosse model in Indian banking context.Design/methodology/approachWe apply Panzar and Rosse (1987) H-statistic and evaluate the degree of bank competition by estimating the extent to which changes in input prices are reflected in revenues earned by banks. Subsequently, we link this measure of competitiveness to a number of structural indicators (HHI and CRn) to examine the structure-conduct-performance hypothesis, which assumes that a concentrated banking system can impair competition. The simple panel regression model was used to handle the empirical estimations.Findingsfindings reveal that the Indian banking system operates under competitive conditions and earns revenues as if under the monopolistic competition. We also find evidence that Indian banks are competitive, even under a concentrated market structure. This observation runs, in contrary, to the prediction of the structure–conduct–performance hypothesis. The findings also indicate the differences in the estimated H-statistic value after considering the misspecifications of the P–R model.Practical implicationsFrom policy perspectives, policymakers should focus more on maintaining an optimal level of bank competition by mitigating entry restrictions, exercising less consolidation and withdrawing overregulation from banking activities. A competitive banking industry ensures both efficiency and stability.Social implicationsA competitive banking sector by lowering interest rates margin provides easier access to finance to both households and small and medium enterprises (SMEs).Originality/valueThis is the only study that addresses the misspecification of the P–R model while assessing competition in Indian banking and provides a thorough understanding of the role of concentration on bank competition.
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