Covid-19, sovereign risk and monetary policy: Evidence from the European Monetary Union

Karaman, Seçil Yıldırım

doi:10.1016/j.cbrev.2022.08.001

Cited by 8 publications

(2 citation statements)

References 24 publications

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“…The results indicate that GIIPS countries encountered an increase in the sovereign risk, but there is no proof that negative volatility spillovers were transmitted to core EMU economies. Karaman (2022) analyses the impact of the ECB's policy measures and the Covid-19 pandemic on SCDS markets but only for EMU countries. Their sample period ranges from March 2020 at the beginning of the pandemic and end in November 2020 when most of the lockdown measures were closed.…”

Section: European Financial Markets Exposed To Exogenous Shocks: Comm...mentioning

confidence: 99%

European Financial Markets Exposed to Exogenous Shocks: Communication Dynamics Among Investors and Tech Models to Detect Financial Contagion

Ciocîrlan,

Popescu-Crețulescu,

Stancea

2024

ISF

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Brexit, the Covid Pandemic and the Russia-Ukraine War represent the latest three major global events that have demonstrated that financial contagion is a phenomenon that needs careful study because its global effects can cause unprecedented shocks to regional and global financial markets. The main reason is related to the interconnectedness of these markets, the interdependence between countries, and the connections created over decades between national and international financial institutions. In this paper, we aim to analyze, using the Diebold-Yilmaz (DY) methodology proposed by Diebold and Yilmaz in 2014, the effects of financial contagion in the three major crises Brexit, Covid and the Russia-Ukraine war (first year). Financial contagion is primarily a fear-driven phenomenon. Financial network connectivity has the potential to change due to investors' fear during events that are disturbing and cause exogenous turbulence. We use the network analysis established by Diebold and Yilmaz (2014) to study how SCDS (Credit Default Sovereign Markets) markets changed their interconnectedness around exogenous shocks in the last decade (Brexit, the Covid-19 pandemic, and the Russian invasion of Ukraine).

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Section: European Financial Markets Exposed To Exogenous Shocks: Comm...mentioning

confidence: 99%

European Financial Markets Exposed to Exogenous Shocks: Communication Dynamics Among Investors and Tech Models to Detect Financial Contagion

Ciocîrlan,

Popescu-Crețulescu,

Stancea

2024

ISF

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“…The global financial market faced intensified challenges due to the COVID-19 outbreak, prompting central banks in developed countries to implement unconventional measures to alleviate the adverse effects. It is crucial, both from an academic and policy perspective, to comprehend the consequences of the pandemic shock and assess the effectiveness of the implemented policies aimed at mitigating its impact (Karaman 2022). While some economists argue that nonconventional monetary tools may offset the effect of the lower bound and provide space for monetary policy (Bernanke and Yellen 2020), others suggest that, due to the changing nature of macroeconomics, the ability of monetary policy to accomplish much when interest rates are at their lower bound is limited (DeLong et al 2012;Eichenbaum 2019;Corradin et al 2021;Ortmans and Tripier 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

Examining Monetary Policy Measures and Their Impacts during and after the COVID Era: OECD Perspectives

Rathnayaka,

Khanam,

Rahman

2024

Economies

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Governments worldwide implemented various fiscal and monetary measures to address the adverse impacts of COVID-19 on their economies. The paper aims to examine the changes in the monetary policy measures due to COVID-19 and their impact on macroeconomic variables. To explore this relationship, this study utilizes fortnightly data from 2020 to 2023 on the OECD (Organisation for Economic Co-operation and Development) countries. The study employs a Panel Autoregressive Distributed Lag (ARDL) model to analyze the effects of the monetary policy responses of the OECD governments, and the obtained results reveal that within OECD countries, the prevailing trend of lower interest rate policies emerged during the pandemic. This policy approach yielded a dual effect: lowering both output growth and inflation rates, while concurrently exacerbating unemployment rates throughout the COVID-19 period. Consequently, it is clear that monetary policies have played a pivotal role in facilitating the recovery from a profound economic shock such as the COVID-19 pandemic. Given the significant economic repercussions of a pandemic and the crucial role that monetary policy plays in sustaining economic stability, the apparent lack of attention underscores the urgent necessity for additional discourse on this vital subject.

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Time-varying effects of the COVID-19 pandemic on stock markets and economic activity: evidence from the US and Europe

Caporale,

Çatık,

Helmi

et al. 2024

Empirica

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This paper examines the effects of the COVID-19 pandemic on CDS, stock returns, and economic activity in the US and the five European countries that have been most affected: the UK, Germany, France, Italy, and Spain. The sample period covers the period from 11 March 2020 to 19 February 2021. In the empirical analysis, first, we estimate benchmark linear VAR models and then, given the evidence of parameter instability, TVP-VAR models with stochastic volatility, which are ideally suited to capturing the changing dynamics in both financial markets and the real economy. The linear VAR responses of CDS to the number of COVID-19 cases are positive and statistically significant, whilst those of electricity consumption are insignificant and those of stock returns vary across countries in terms of their sign and significance. The results from the TVP-VAR analysis indicate that the effects of shocks on the system variables was more pronounced during the initial stages of the pandemic and then decreased in the following months. Specifically, there was a positive impact of the number of COVID-19 cases on CDS and a negative one on stock returns and economic activity, the latter two being interlinked.

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Covid-19, sovereign risk and monetary policy: Evidence from the European Monetary Union

Cited by 8 publications

References 24 publications

European Financial Markets Exposed to Exogenous Shocks: Communication Dynamics Among Investors and Tech Models to Detect Financial Contagion

European Financial Markets Exposed to Exogenous Shocks: Communication Dynamics Among Investors and Tech Models to Detect Financial Contagion

Examining Monetary Policy Measures and Their Impacts during and after the COVID Era: OECD Perspectives

Time-varying effects of the COVID-19 pandemic on stock markets and economic activity: evidence from the US and Europe

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