Catastrophic impact of Covid‐19 on the global stock markets and economic activities

• Published date: 01 June 2022
• Author: Emon Kalyan Chowdhury,Iffat Ishrat Khan,Bablu Kumar Dhar
• Date: 01 June 2022
• DOI: http://doi.org/10.1111/basr.12219

Bus Soc Rev. 2022;127:437–460.

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437

wileyonlinelibrary.com/journal/basr

Received: 26 September 2020

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Accepted: 7 November 2020

DOI: 10.1111/basr.12219

ORIGINAL ARTICLE

Catastrophic impact of Covid-19 on the global stock

markets and economic activities

Emon KalyanChowdhury1

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Iffat IshratKhan1

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Bablu KumarDhar2

© 2021 W. Michael Hoffman Center for Business Ethics at Bentley University.

1CIU Business School, Chittagong

Independent University, Chattogram,

Bangladesh

2Department of International Trade and

Economics, Yantai Vocational College,

Yantai University, Shandong, China

Correspondence

Emon Kalyan Chowdhury, CIU Business

School, Chittagong Independent University,

12 Jamal Khan Lane, Chattogram-4000,

Bangladesh.

Abstract

This paper intends to know the influence of COVID-19 on

the stock markets and economic activities across the world.

To achieve the purpose, daily panel data of 12 selective

countries covering four continents from January to April

2020 have been collected. The impact on stock markets has

been measured by applying the event study method, while

the panel vector autoregressive model has been applied to

measure the impact on economic activities. The stock index

of each country, purchasing managers’ index, COVID-19

variables, namely the number of lockdown days, restriction

in internal movement, restriction in international travel,

fiscal measure, and confirmed cases have been used. The

study observes the serious negative impact of the pandemic

on stock market returns. European stock markets are the

worst sufferer compared to others. All pandemic variables

have a negative impact on stock markets; moreover, lock-

down days and restriction on movement have a negative

impact on economic activities. This study considers such

countries which significantly represent the world economy

and are a serious victim of COVID-19 pandemic. The

outcome-based recommendations will help governments,

regulatory authority, and policymakers to combat the crisis

in different dimensions.

KEYWORDS

COVID-19, economic activities, event study method, panel VAR,

stock markets

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INTRODUCTION

The novel coronavirus pandemic known as COVID-19has been officially reported to get started in

December, 2019. Evolving in the Hubei province of China, the disease has spread over all continents

except Antarctica in a concise period (Hui et al., 2020). As of May 1, 2020, the total number of af-

fected people worldwide is 3.26 million, with 234 thousand deaths across 212 countries and territories

(Worldometer, 2020). The number of newly affected countries and patients are increasing day by day.

At the beginning, the world has seen how China was struggling to fight with this disease with number

of patients increasing exponentially. China declared strict lockdown in its Hubei province on January

23, 2020 that included complete closure of tourist spots, banning of international and domestic trav-

eling, and closure of educational and financial institutions. After relaxing the lockdown for several

times, China finally lifted the lockdown on 8th April after ensuring zero new domestic cases. However,

the spread of the disease and consequent lockdown brought tremendous financial loss to the Chinese

Economy and resulted in 6.8% fall in their GDP in the first quarter of this year compared to the same

in last year (Li & Detrixhe, 2020). Although in the beginning, the COVID-19 virus attacked countries

around the East Asian region, that is, China, Hong Kong, South Korea, and Japan, as days passed, the

epicenter of the virus moved to Europe and then to North America. To date, the worst affected victims

of this disease belong to the continents of North America and Europe, namely the United States, Italy,

France, Spain, Germany, and more (Hui et al., 2020).

Europe has experienced the worst in March, but for the last couple of weeks of April, the continent

has shown signs of the declining rate of both newly affected and deceased. However, with one-third

of the total affected patients of COVID-19 and the highest number of deaths in the world, the United

States is still at the pick of the spread of the disease (Worldometer, 2020). To control the spread of

this highly contagious disease, many countries across the world have walked through the same path

as China and implemented long spells of lockdowns (Fernandes, 2020). In this era of globalization,

the world has ironically witnessed the separation of countries through the withdrawal of international

events, movements, and trades. Freights by air, sea, and land has come to a standstill. The tourism

and airline industry have experienced zero purchasing deals for weeks and months. Even the sports

industry has fall victim to this mishap. Global sports events like the Tokyo 2020 Olympics have been

suspended (“Coronavirus: What sporting events,” 2020).

This “resting” mode of the world has resulted in a tremendous financial crisis. It has already sur-

passed the economic turmoil of the 2008–09 recession. Moreover, the International Monetary Fund

(IMF) has declared that the world is facing the worst economic crisis since the Great Depression

that occurred in the 1930s (“Coronavirus: Worst economic crisis,” 2020). With the increasing rate

of infection every day, the world must prepare even for a worse outcome. To combat this crisis, pol-

icymakers are coming with contingency planning and stimulus packages to support their economies

(Fernandes, 2020). To assist world leaders in mapping the financial impact of COVID-19 on the world

economy, this study finds out COVID-19’s impact on stock markets of 12 important countries from

Asia, Europe, North America, and Africa and analyzes its impact on the overall economic activities of

different sectors of the same countries.

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LITERATURE REVIEW

The COVID-19 disease has spread very fast in the world and brought worse effect than any other

contagious outbreak those broke out in recent time such as Ebola and Swine Flu. Looking at the past

100years, the closest outbreak that is comparable to the COVID-19 pandemic was found to be the

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