Monetary policy, COVID-19 immunization, and risk in the US stock markets
We examine how monetary policy of the Federal Reserve System, COVID-19 mortality cases, and vaccinations are associated with the US stock market volatility during the pandemic period. Using the wavelet coherence analysis, we first find that there is a positive relationship between the volatility and...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2148365 |
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| author | Seungho Baek Kwan Yong Lee |
| author_facet | Seungho Baek Kwan Yong Lee |
| author_sort | Seungho Baek |
| collection | DOAJ |
| description | We examine how monetary policy of the Federal Reserve System, COVID-19 mortality cases, and vaccinations are associated with the US stock market volatility during the pandemic period. Using the wavelet coherence analysis, we first find that there is a positive relationship between the volatility and death tolls. Second, while in the short term the sizable interest rate cut causes market instability, in the intermediate term it stabilizes the market. Third, vaccinations and the volatility have a negative relationship. Finally, the monetary policy and the volatility have much stronger coherency than the vaccination and the movements. These findings are consistent with panel regression results. Specifically, we find that the systemic COVID-19 shock in the US stock market is alleviated by an increase in the number of COVID-19 vaccination doses administered and a low and stable change in the effective federal funds rate. Furthermore, our results show that the monetary policy influences the stock market volatility significantly more than the vaccination, regardless of firm size and industry type. Thus, this study helps policymakers cope with possible systemic shocks from other infectious diseases, considering the magnitude of monetary and health policy and their short/intermediate/long-term lagging effectiveness in reducing market volatility. |
| format | Article |
| id | doaj-art-96c7ed655de14fa8a2f856aef4a6c800 |
| institution | DOAJ |
| issn | 2332-2039 |
| language | English |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-96c7ed655de14fa8a2f856aef4a6c8002025-08-20T03:12:41ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2148365Monetary policy, COVID-19 immunization, and risk in the US stock marketsSeungho Baek0Kwan Yong Lee1Brooklyn College and Graduate Center, City University of New York, New York, USADepartment of Economics and Finance, Nistler College of Business & Public Administration, University of North Dakota, North Dakota, USAWe examine how monetary policy of the Federal Reserve System, COVID-19 mortality cases, and vaccinations are associated with the US stock market volatility during the pandemic period. Using the wavelet coherence analysis, we first find that there is a positive relationship between the volatility and death tolls. Second, while in the short term the sizable interest rate cut causes market instability, in the intermediate term it stabilizes the market. Third, vaccinations and the volatility have a negative relationship. Finally, the monetary policy and the volatility have much stronger coherency than the vaccination and the movements. These findings are consistent with panel regression results. Specifically, we find that the systemic COVID-19 shock in the US stock market is alleviated by an increase in the number of COVID-19 vaccination doses administered and a low and stable change in the effective federal funds rate. Furthermore, our results show that the monetary policy influences the stock market volatility significantly more than the vaccination, regardless of firm size and industry type. Thus, this study helps policymakers cope with possible systemic shocks from other infectious diseases, considering the magnitude of monetary and health policy and their short/intermediate/long-term lagging effectiveness in reducing market volatility.https://www.tandfonline.com/doi/10.1080/23322039.2022.2148365COVID-19vaccinationmonetary policyvolatilitystock marketwavelet analysis |
| spellingShingle | Seungho Baek Kwan Yong Lee Monetary policy, COVID-19 immunization, and risk in the US stock markets Cogent Economics & Finance COVID-19 vaccination monetary policy volatility stock market wavelet analysis |
| title | Monetary policy, COVID-19 immunization, and risk in the US stock markets |
| title_full | Monetary policy, COVID-19 immunization, and risk in the US stock markets |
| title_fullStr | Monetary policy, COVID-19 immunization, and risk in the US stock markets |
| title_full_unstemmed | Monetary policy, COVID-19 immunization, and risk in the US stock markets |
| title_short | Monetary policy, COVID-19 immunization, and risk in the US stock markets |
| title_sort | monetary policy covid 19 immunization and risk in the us stock markets |
| topic | COVID-19 vaccination monetary policy volatility stock market wavelet analysis |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2148365 |
| work_keys_str_mv | AT seunghobaek monetarypolicycovid19immunizationandriskintheusstockmarkets AT kwanyonglee monetarypolicycovid19immunizationandriskintheusstockmarkets |