On the importance of fiscal space: Evidence from short sellers during the COVID-19 pandemic

Greppmair, Stefan; Jank, Stephan; Smajlbegovic, Esad

doi:10.1016/j.jbankfin.2022.106652

Cited by 3 publications

(3 citation statements)

References 119 publications

(136 reference statements)

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“…Moreover, in our sample we find that countries with higher debt levels of the eve of the pandemic actually responded more, even after accounting for the severity of their economic downturns. Even though other studies, such as Greppmair et al (2023), have reported evidence that highly indebted countries had to pay more to borrow during the pandemic, we find no evidence that the quantity of support was meaningfully constrained by fiscal space problems.…”

Section: Discussioncontrasting

confidence: 99%

“…For example, Romer and Romer (2019) show that countries with high debt-to-GDP ratios have smaller fiscal responses to financial crises. Moreover, Greppmair et al (2023) show that countries with limited fiscal space saw bigger increases in CDS spreads at the onset of the pandemic. As such, the finding that countries with higher debt-to-GDP ratios spent more would appear to be counterintuitive.…”

Section: Introductionmentioning

confidence: 97%

See 1 more Smart Citation

Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19

Elbourne,

Piccillo,

Velentzas

2023

SSRN Journal

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Section: Discussioncontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 97%

Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19

Elbourne,

Piccillo,

Velentzas

2023

SSRN Journal

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“…The two crises create a pessimistic view in investors on the performance of the financial markets and influences them to take short positions to either hedge against risk or profit from expected market declines. Greppmair et al (2022) study how informed market participants incorporate fiscal space into their trading decisions in the European market during Covid-19. They suggest that after the outbreak of Covid-19, short sellers correctly anticipated the underperformance of illiquid firms in countries with low credit ratings.…”

Section: Literature Reviewmentioning

confidence: 99%

Time-Varying Effect of Short Selling on Market Volatility During Crisis: Evidence from COVID-19 and War in Ukraine

Baidoo¹

2022

EJOBSAT

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In this paper, we empirically investigate the effect of short selling on market volatility during exogenously-induced uncertainties. Using the Covid-19 pandemic and the onset of the Russian-Ukraine Conflicts periods as event study, we employ the asymmetric EGARCH model. We show high persistence and asymmetric effects of market volatility during the pre-covid outbreak and post-covid outbreak periods. We find evidence that short selling increases market volatility during the pre-covid outbreak period while the period of the Russian-Ukraine conflict is characterized by reduced volatility. We find no evidence of short selling effect on market volatility during the postcovid outbreak period. Our findings provide significant implications for short-selling strategies during crisis periods.

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Mitigating the impact of a pandemic: a time-varying-parameter structural VAR (TVP-SVAR) and time-varying granger causality estimations

Olaoye,

Zerihun

2023

AJEMS

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PurposeThe study investigates the effectiveness of government policies to mitigate the impact of a pandemic. The study adopts the small open economy of Nigeria for the following reasons. First, Nigeria is the largest economy in SSA. Second, Nigeria was also significantly impacted by the COVID-19 pandemic.Design/methodology/approachThe study employed the time-varying structural autoregressive (TVSVAR) model to control for the potential asymmetry in fiscal variables and to control for the shift in the structural shift, following a macroeconomic shock. As a form of robustness, the study also implements the time-varying Granger causality to formally assess the temporal instability of the variable of interest.FindingsThe results show that an oil price shock is an important source of macroeconomic instability in Nigeria. Importantly, the results indicate that the effects of fiscal policy are strongly time varying. Specifically, the results show that fiscal policy helps to stabilize the economy, (i.e. they help to reduce inflation and spur output growth) following macroeconomic shock. Further, the Granger test shows that fiscal policy helped to spur growth in Nigeria. The research and policy implications are discussed.Originality/valueThe study accounts for the time-varying effects of fiscal policy.

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On the importance of fiscal space: Evidence from short sellers during the COVID-19 pandemic

Cited by 3 publications

References 119 publications

Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19

Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19

Time-Varying Effect of Short Selling on Market Volatility During Crisis: Evidence from COVID-19 and War in Ukraine

Mitigating the impact of a pandemic: a time-varying-parameter structural VAR (TVP-SVAR) and time-varying granger causality estimations

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