Understanding Market Reaction to Covid-19 Monetary and Fiscal Stimulus in Major Asean Countries

Abstract

In this paper, we examine the effect of fiscal and monetary policy stimulus actions during the COVID-19 pandemic on the stock markets of four ASEAN countries, namely, Indonesia, Singapore, Malaysia, and Thailand. Using time-series regression models, we show the relative importance of monetary and fiscal policies. Our findings suggest that 7-days after the policy announcement, fiscal policies helped cushion financial market losses in Indonesia, Singapore and Thailand. We do not find any robust evidence of policy effectiveness for Malaysia. While our investigation is preliminary it opens an additional avenue for understanding the effectiveness of policy stimulus.

Determining the return volatility of the Ghana stock exchange before and during the COVID-19 pandemic using the exponential GARCH model

“…( 1 ): where represents current stock returns; represents the price at current day t ; ln denotes natural log, and represents the price of the previous day . Following that, to comprehend the impact of the COVID-19 pandemic on stock returns, based on past research (Rizvi, et al 2018 ; Rizvi, et al 2021 ; Haroon et al 2021 ; Özdemir et al 2021 ; Haldar and Sethi 2021 ), we utilise the Exponential GARCH (EGARCH) model. The literature corroborates the use of the EGARCH model, an asymmetric model developed by Nelson ( 1991 ).…”

“…Previous studies have established a substantial nexus between pandemics and economic growth due to the substantial economic cost of pandemics (Bloom et al 2018 ; Iyke et al 2021 ). Nonetheless, albeit different findings, the COVID-19 pandemic’s impact on stock markets mainly concentrates on the equity and bond markets in developed nations (Özdemir et al 2021 ; Gubareva 2021 ; Endri et al 2021 ; Singh et al 2020a ; Hassan et al 2021 ; Devpura et al 2021 ; Rizvi et al 2021 ; Zaremba et al 2020 ; Liu et al 2020a , b ). The COVID-19 pandemic, in theory, will alter investor expectations, perhaps resulting in a decrease in stock market returns.…”

COVID-19 policy actions and inflation targeting in South Asia

“…An important implication of these findings is that fiscal actions may take a longer time to take effect in impacting the CPI in economies while grants/aid are more temporary measures. As suggested by Rizvi et al (2021) , monetary and fiscal measures’ impact on economy is intertwined. Additionally, our analysis suggests that amongst the varied nature of policy actions, direct credit support and healthcare targeted policy actions significantly impacted the CPI in the SAARC countries considered.…”

“…This study makes contribution in two aspects. Firstly, this study is amongst the first to study and document the role of government policies and its impact on CPI and economic indicators during the COVID-19 pandemic (See: Long, Chang, Jegaveen and Tang, 2021; Zhang, Ding, & Li, 2021 ; Rizvi, Juhro, & Narayan, 2021 ; Fu, Alleyne, & Mu, 2021 ) We were able to distinguish policy actions between monetary and financial actions in comparison with fiscal actions and grants/aid. An important implication of these findings is that fiscal actions may take a longer time to take effect in impacting the CPI in economies while grants/aid are more temporary measures.…”

The Impact of Fiscal Space on Indonesia’s Fiscal Behavior

“…Corden (2011) states that Counter-cyclical fiscal policy reduces crisis risk. Furthermore, a study by Rizvi et al (2021) finds that fiscal policy affects the economy in the short run through its effect on the stock market in four major ASEAN countries. Nerlich and Reuter (2016) and Aizenman et al (2019) state that the ability of a country to accumulate fiscal space is a crucial factor that determines fiscal behavior (pro-cyclical or counter-cyclical fiscal behavior).…”