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Business Review

Abstract

This paper examines the impact of coronavirus (COVID-19) on exchange rate (EXU) and stock market uncertainty (SMU) in Pakistan while controlling for the effects of interest rate and policy interventions by the Government and the Central bank to combat the pandemic. We employ the vector autoregressive (VAR) model over a sample period ranging from February 25, 2020 to May 6, 2021. We find that a shock to total daily coronavirus cases in Pakistan has a positive and significant impact on both the EXU and SMU. However, this impact is short-lived which may be attributed to a timely policy response and risk-averse nature of investors in Pakistan. This result is aligned with a vast literature on pandemics and investors uncertainty and remains robust to several robustness check exercises.

Keywords

COVID-19, Stock Market Uncertainty, Exchange Rate Uncertainty, VAR, Pakistan

DOI

https://doi.org/10.54784/1990-6587.1423

Journal of Economic Literature Subject Codes

C3, D8, E6, G1

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Published Online

February 07, 2022

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