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Assessing the impact of COVID-19 on price Co-movements in China

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  • Xu, Yingying
  • Lien, Donald

Abstract

The COVID-19 crisis has caused violent fluctuations in prices, and government responses to the pandemic further intensify the uncertainty of price changes. This study evaluates the dynamic price co-movement of main consumption categories within an Additive Bayesian Network (ABN) framework, which shows dramatically fluctuating price risks during the pandemic period. The global fears for COVID-19 affects price co-movements in China negatively with a direct linkage. By contrast, confirmed cases in China, confirmed cases around the world, and fears for the domestic pandemic situation are indirectly related with price co-movements through financial markets. The exchange rate and international hedging assets such as gold play important intermediary roles in such relationships. Meanwhile, volatile international markets including crude oil and Bitcoin are also indirectly linked with price changes in China. Comparing with the situation in China, the global pandemic appears to be a more important factor influencing the price stability in China. Overall, the impacts of COVID-19 on price co-movements are empirically demonstrated, which highlights the importance of prudent policies in response to the pandemic.

Suggested Citation

  • Xu, Yingying & Lien, Donald, 2022. "Assessing the impact of COVID-19 on price Co-movements in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:intfin:v:79:y:2022:i:c:s1042443122000828
    DOI: 10.1016/j.intfin.2022.101602
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    Cited by:

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    2. Xu, Yingying & Lien, Donald, 2024. "Together in bad times? The effect of COVID-19 on inflation spillovers in China," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 316-331.

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    More about this item

    Keywords

    COVID-19; Price co-movement; Inflation; Uncertainty; Network;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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