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.
COVID-19, Stock Market Uncertainty, Exchange Rate Uncertainty, VAR, Pakistan
Journal of Economic Literature Subject Codes
C3, D8, E6, G1
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Syed, A., Fatima, K., & Zaheer, M. (2022). The impact of COVID-19 on stock market and exchange rate uncertainty in Pakistan. Business Review, 16(2), 96-108. Retrieved from https://doi.org/10.54784/1990-6587.1423
February 07, 2022