COVID-19 and Moderating Effects of Government Stimulus

Abstract

In this paper, we study the impact of the COVID-19 pandemic on the economic conditions and the stock markets of countries across the world. We find that an increase in contagion and death rate due to the pandemic inversely affects both the country’s GDP and its stock markets. Next, we study the impact of government stimulus on the economic conditions and the stock markets of each of the countries in our sample. We find that the government stimulus moderates the effect of COVID-19 on the real condition of economies as we find that GDP is not affected by COVID-1- -related death in the post-stimulus period. The stimulus alleviates the negative impact of pandemic concerns on the stock markets, where the increase in contagion and death rate due to COVID-19 positively correlates with the performance of stock markets in the post-stimulus period.

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