Hang in There: Stock Market Reactions to Withdrawals of COVID-19 Stimulus Measures
The COVID-19 pandemic prompted unprecedented economic stimulus worldwide. We empirically examine the impact of a withdrawal of fiscal stimulus policies on the stock markets. After constructing a database of withdrawal events, we use event study analysis and cross-country regressions to assess the di...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
2020
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| Series: | IMF Working Papers
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| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | The COVID-19 pandemic prompted unprecedented economic stimulus worldwide. We empirically examine the impact of a withdrawal of fiscal stimulus policies on the stock markets. After constructing a database of withdrawal events, we use event study analysis and cross-country regressions to assess the difference between the pre- and post-event stock price returns. We find that markets react negatively to premature withdrawals—defined as withdrawals at a time when the daily COVID cases are high relative to their historical average—likely reflecting concerns about the withdrawal impact on the prospects for economic recovery. The design of a successful exit strategy from COVID-19 policy responses should account for these concerns |
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| Physical Description: | 22 pages |
| ISBN: | 9781513564753 |