Time-frequency dynamics of financial market stress and global economic uncertainties: evidence from the COVID-19 pandemic

ABSTRACT

Given the negative effects of the COVID-19 pandemic on world economies, uncertainties are expected to increase during this period. To this end, we examine the time-frequency dynamics of financial market stress and economic uncertainties. We apply in-sample and out-sample namely; bivariate wavelet and quantile causality to accentuate the importance of economic uncertainties and market stress during COVID-19. We find that both in-sample and out-sample for economic uncertainty drive and pose a high risk to the financial market during COVID-19.

JEL CLASSIFICATION:

• financial market stress
• economic uncertainties
• wavelet coherence
• COVID-19
• quantile causality

KEYWORDS:

• E60
• G10
• G18

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ www.Fred.stlouisfed.org.

² https://www.financialresearch.gov/financial-stress-index.