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World pandemic uncertainty and German stock market: evidence from Markov regime-switching and Fourier based approaches

Author

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  • Seyed Alireza Athari

    (Cyprus International University)

  • Dervis Kirikkaleli

    (European University of Lefke)

  • Tomiwa Sunday Adebayo

    (Cyprus International University)

Abstract

This study aims to examine the impact of the world pandemic uncertainty index on the German stock market index (DAX index) for the 1996Q1 to 2020Q3 period while controlling real effective exchange rate, industrial production index, and consumer price index. The present study performs the Fourier Augmented Dickey-Fulle Unit Root, Fourier Engle-Granger Cointegration, Bayer-Hanck Cointegration, and Markov switching regression tests. The outcomes disclose that there is a long-run cointegration association between the stock market index and world pandemic uncertainty index, real effective exchange rate, industrial production index, and consumer price index in Germany, indicating that the combination of these factors significantly affects the German stock market index in the long-run. Moreover, in both high and low volatile regimes, the world pandemic uncertainty index and real effective exchange rate negatively affect the German stock market index while industrial production and consumer price indices impact positively.

Suggested Citation

  • Seyed Alireza Athari & Dervis Kirikkaleli & Tomiwa Sunday Adebayo, 2023. "World pandemic uncertainty and German stock market: evidence from Markov regime-switching and Fourier based approaches," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 1923-1936, April.
    • Handle: RePEc:spr:qualqt:v:57:y:2023:i:2:d:10.1007_s11135-022-01435-4
    DOI: 10.1007/s11135-022-01435-4
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