The Impact of COVID-19 on Emerging Market Economies' Financial Conditions

Ahmed, Shaghil; Hoek, Jasper; Kamin, Steve; Smith, Bonnie G.; Yoldaş, Emre

doi:10.17016/2380-7172.2749

Cited by 14 publications

(5 citation statements)

References 11 publications

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“…Their findings reveal that the impact of the outbreak has been the highest in Asian emerging markets whereas European emerging markets have experienced the lowest. The emerging market economies face a credit crunch, also referred to as capital flows (Ahmed et al, 2020). Goldberg and Reed (2020) discussed the negative effect of COVID‐19 on the trade of emerging economy.…”

Section: Literature Reviewmentioning

confidence: 99%

The outbreak of COVID‐19 pandemic and its impact on stock market volatility: Evidence from a worst‐affected economy

Bora

Basistha²

2021

Journal of Public Affairs

106

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This paper empirically investigates the impact of COVID‐19 on the volatility of stock prices in India with the help of a generalized autoregressive conditional heteroscedasticity model. Daily closing prices of stock indices, Nifty and Sensex from September 3, 2019 to July 10, 2020 has been used for the analysis. Further, the study has been attempted to make a comparison of stock price return in pre‐COVID‐19 and during COVID‐19 situation. Findings reveal that the stock market in India has experienced volatility during the pandemic period. While comparing the result during COVID period with that of the pre‐COVID, we found that the return on the indices is higher in the pre‐COVID‐19 period than during COVID‐19.

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Section: Literature Reviewmentioning

confidence: 99%

The outbreak of COVID‐19 pandemic and its impact on stock market volatility: Evidence from a worst‐affected economy

Bora

Basistha²

2021

Journal of Public Affairs

106

View full text Add to dashboard Cite

show abstract

“…They show that the number of cases had a negative effect on exchange rates and capital flows. Similarly, Ahmed, Hoek, Kamin, Smith, and Yoldas (2020) show that the COVID-related deaths and the intensity of pandemic restrictions had adverse effects on emerging market exchange rates, the CDS spreads on dollar-denominated debt, and equity prices; the paper focuses on the initial months of the pandemic and does not cover high-frequency portfolio flows throughout the pandemic duration, which we do.…”

Section: Literaturementioning

confidence: 89%

"The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic"

Davis¹,

Zlate²

2022

gwp

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We estimate the heterogeneous effect of the global financial cycle on exchange rates and cross-border capital flows during the COVID-19 pandemic, using weekly exchange rate and portfolio flow data for a panel of 59 advanced and emerging market economies. We begin by estimating a global financial cycle (GFC) index at the weekly frequency with data through the end of 2021, and observe an outsized decline in the index over a period of just four weeks during February and March 2020. We then estimate the country-specific sensitivities of exchange rates and capital flows to fluctuations in the GFC. We show that the ability of the GFC to explain fluctuations in exchange rates and capital flows increased dramatically during the pandemic crisis. By using the law of the total variance we are able to decompose a panel of country-specific exchange rate or capital flow series into the time-series variance of the cross-sectional mean and the cross-sectional variance around that mean. We show that the GFC mainly explains the time-series variance of the crosssectional mean. In addition, during the pandemic crisis like the COVID pandemic in 2020, relevant high-frequency indicators such as the weekly changes in cases and vaccination rates, which varied in timing and intensity across countries, improve the cross-sectional fit of our model by just as much as standard macroeconomic fundamentals such as the current account, reserves, and net foreign assets.

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“…Amid this turmoil, capital flows-particularly portfolio flows-generally reversed sharply from EMDEs, putting pressure on their external finances (Figure 2a). This contributed to a depreciation of domestic currencies and other asset values and led to a sharp tightening of domestic financial conditions (Figure 2b), particularly in more vulnerable EMDEs (Ahmed et al 2020;OECD 2021;Scott and Zlate 2022).…”

Section: On the Brinkmentioning

confidence: 99%

Macro-Financial Stability in the COVID-19 Crisis: Some Reflections

Qureshi¹,

Adrian²,

Natalucci³

2022

IMF Working Papers

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The global financial system has shown remarkable resilience during the COVID-19 pandemic, despite a sharp decline in economic activity and the initial financial market upheaval in March 2020. This paper takes stock of the factors that contributed to this resilience, focusing on the role of monetary and financial policies. In response to the pandemic-induced crisis, major central banks acted swiftly and decisively, cutting policy rates, introducing new asset purchase programs, providing liquidity support for the banking system, and creating several emergency facilities to sustain the flow of credit to the real economy. Several emerging market central banks also deployed asset purchase programs for the first time. While the pandemic crisis has underscored the importance of policies in preventing calamitous financial outcomes, it has also brought to the fore some unintended consequences of policy actions-in particular, of providing prolonged monetary policy support and applying regulation to specific segments of the financial system rather than taking a broader approach-that could undermine financial stability in the future.

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The Impact of COVID-19 on Emerging Market Economies' Financial Conditions

Cited by 14 publications

References 11 publications

The outbreak of COVID‐19 pandemic and its impact on stock market volatility: Evidence from a worst‐affected economy

The outbreak of COVID‐19 pandemic and its impact on stock market volatility: Evidence from a worst‐affected economy

"The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic"

Macro-Financial Stability in the COVID-19 Crisis: Some Reflections

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