COVID-19, Government Policy Responses, and Stock Market Liquidity around the World: A Note

Abstract

Unprecedented non-pharmaceutical interventions targeted to curb the spread of COVID-19 exerted a dramatic impact on the global economy and financial markets. This study is the first attempt to investigate the influence of these government policy responses on global stock market liquidity. To this end, we examine daily data from 49 countries for the period January-April 2020. We demonstrate that the impact of the interventions is limited in scale and scope. Workplace and school closures deteriorate liquidity in emerging markets, while information campaigns on the novel coronavirus facilitate trading activity.

Keywords: novel coronavirus, COVID-19, stock market liquidity, turnover ratio, non-pharmaceutical interventions, government policy responses, international financial markets

JEL Classification: G01, G12, G15, G18, H12, H51, I18, Q54