COVID-19 and Capital Flows: The Responses of Investors to the Responses of Governments

33 Pages Posted: 23 Nov 2021

See all articles by Stefan Goldbach

Stefan Goldbach

Deutsche Bundesbank

Volker Nitsch

Technical University of Darmstadt

Date Written: 2021

Abstract

This paper examines the effect of national government response measures to Covid-19 on German international capital flows. Analyzing highly disaggregated monthly data from the German balance of payments statistics over the period from January 2019 through January 2021, we find that bilateral financial interactions are negatively affected by stricter containment and closure policies as well as health system policies of a partner country, while German capital flows benefit from a partner’s economic support policies. Moreover, to the extent that public interventions to fight the pandemic affect financial interactions, the adjustment mainly takes place along the intensive margin.

Keywords: coronavirus, pandemic

JEL Classification: F360, F600, I180

Suggested Citation

Goldbach, Stefan and Nitsch, Volker, COVID-19 and Capital Flows: The Responses of Investors to the Responses of Governments (2021). CESifo Working Paper No. 9416, Available at SSRN: https://ssrn.com/abstract=3969572 or http://dx.doi.org/10.2139/ssrn.3969572

Stefan Goldbach (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Volker Nitsch

Technical University of Darmstadt ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

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