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The impact of monetary and fiscal stimulus on stock returns during the COVID-19 Pandemic

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  • Behera, Chinmaya
  • Rath, Badri Narayan
  • Mishra, Pramod Kumar

Abstract

We contribute to the literature by investigating the impact of monetary and fiscal stimulus and exchange rate on stock returns during the COVID-19 Pandemic in Australia, China, India, and Indonesia. By employing the machine learning approach, We find that monetary stimulus positively boosts the stock return of Indonesia. Contrary, fiscal stimulus adversely affected stock return in Australia. The exchange rate positively impacts stock return for both India and Indonesia during the COVID-19 Pandemic. However, the findings from this study reveal that both monetary and fiscal stimulus have no effect on the stock market return in the case of China and India. Policymakers needs better strategy to counter the extreme events like pandemic. Our model is robust to the alternative model specification.

Suggested Citation

  • Behera, Chinmaya & Rath, Badri Narayan & Mishra, Pramod Kumar, 2024. "The impact of monetary and fiscal stimulus on stock returns during the COVID-19 Pandemic," Journal of Asian Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:asieco:v:90:y:2024:i:c:s1049007823001008
    DOI: 10.1016/j.asieco.2023.101680
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    More about this item

    Keywords

    Monetary policy; Fiscal policy; Stock return; Machine learning; COVID-19;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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