COVID-19 and currency market: a comparative analysis of exchange rate movement in China and USA during pandemic

Figures & data

Figure 1. Time series plot of Exchange rates of China and the USA.

Source: Authors Estimation.

Figure 2. Time series plot of the number of cases and deaths reported in China and the USA.

Source: Authors Estimation.

Table 1. Summary statistics of variables under study.

Variables	Average	Maximum	Minimum	Standard Deviation	Skewness	Kurtosis	Jarque Bera (JB)	P-value
ER China	−0.002	0.640	−0.719	0.191	−0.085	4.130	18.41903**	0.000
COVID-19(cases)	87316.990	102596	548	17473.430	−3.264	15.154	2680.91**	0.000
COVID-19(Deaths)	4293.948	4846	17	1078.990	−2.597	9.149	912.730**	0.000
ER USA	−0.011	0.896	−0.627	0.197	0.285	4.486	35.7170**	0.000
COVID-19(cases)	11301333	32652472	1	11403151	0.698	1.901	44.493**	0.000
COVID-19(Deaths)	234928.600	580999	0	187156.600	0.505	2.012	28.120**	0.000
N	338	338	338	338	338	338	338	338

Note: ** depicts significance at 5% level of significance. The null hypothesis for the JB test is that the series follows the normal distribution.

Source: Authors Estimation.

Table 2. Outcomes of the unit root test with and without structural break.

Variable	Country	ADF test		ZA-test	Order of Integration
		Level	First Difference	Level
ER	China	−18.990**	NA	−19.289**	I(0)
		(0.000)
logCOVID-19 Cases		−0.843	−11.998**	Break date: 7/31/2020	I(1)
		(0.804)	(0.000)
logCOVID-19 Deaths		−1.328	−5.829**		I(1)
		(−0.616)	(0.000)
ER	USA	−16.577**	NA	−11.033**	I(0)
		(0.000)
logCOVID-19 Cases		−0.378	−3.207**	Break date: 5/7/2020	I(1)
		(0.812)	(0.000)
logCOVID-19 Deaths		−1.8254	−6.927**		I(1)
		(0.8562)	(0.000)

Note: P-values are in parenthesis.

** depicts significance at 5% level of significance for ADF test while 5% critical of −4.93 against ZA test.

Source: Authors Estimation.

Table 3. Estimation results of ARDL Bound test of cointegration.

Variables	Exchange returns		logCOVID-19 (Cases)		logCOVID-19 (Deaths)
Countries	China	USA	China	USA	China	USA
F-Statistic	24.168**	25.653**	102.8795**	5.179**	10.344**	5.121**
lag Order	8,6	8,8	6,8	8,8	7,8	8,8
Critical Values	1%	5%	10%
Upper Bound	6.503	4.938	4.235
Lower Bound	5.62	4.18	3.54
Diagnostic measures
$R^2$	0.560	0.560	0.721	0.731	0.799	0.720
Adjusted-$R^2$	0.540	0.529	0.7142	0.721	0.793	0.709
F-Statistic	29.157**	17.785**	101.383**	69.631**	133.264**	65.730**

Source: Authors Estimation.

Figure 3. CUSUM stability test of China and the USA for COVID-19 cases.

Source: Authors Estimation.

Figure 4. CUSUM stability test of China and the USA for COVID-19 Deaths.

Source: Authors Estimation.

Table 4. Estimation results of ARDL long (short) run estimates with COVID-19 cases.

Variables	China (Exchange rate)	USA (Exchange rate)
Long run estimates
Log COVID-19	−0.5420(0.000)**	−1.488(0.0003)**
Trend	0.252(0.000)**	0.165(0.000)**
Constant	6.394 (0.000)**	2.138(0.000)**
Short run estimates
ΔCOVID-19	−0.096(0.000)**	−0.108(0.000)**
Trend	0.495(0.000)**	0.235(0.000)**
Constant	4.368 (0.000)**	7.654(0.000)**
$EC{T}_{t-1}$	−0.028(0.000)**	−0.092(0.000)**
$R^2$	0.785	0.863
F-Statistic	320.970(0.000)**	675.980(0.000)**
Diagnostic tests
${\chi }_{\mathit{Normal}}^2$	5.079(0.0786)	4.257(0.218)
${\chi }_{\mathit{ARCH}}^2$	0.542(0.654)	0.343(0.558)
${\chi }_{\mathit{Ramsey}}^2$	0.598(0.279)	0.769(0.964)
${\chi }_{\mathit{Serial}}^2$	0.318(0.865)	0.246(0.352)

Source: Authors Estimation.

Table 5. Estimation results of ARDL long (short) run estimates with COVID-19 deaths.

Variables	China	USA
Long run estimates
COVID-19	−0.247(0.000)**	−0.379(0.0003)**
Trend	0.325(0.000)**	0.379(0.000)**
Constant	6.987(0.000)**	3.621(0.000)**
Short run estimates
ΔCOVID-19	−0.674(0.000)**	−0.943(0.000)**
Trend	0.975(0.000)**	0.635(0.000)**
Constant	3.484(0.000)**	2.532(0.000)**
$EC{T}_{t-1}$	−0.056(0.000)**	−0.043(0.000)**
$R^2$	0.653	0.952
F-Statistic	793.480(0.000)	557.140(0.000)**
Diagnostic tests
${\chi }_{\mathit{Normal}}^2$	7.958(0.693)	8.357(0.701)
${\chi }_{\mathit{ARCH}}^2$	0.863(0.074)	0.642(0.831)
${\chi }_{\mathit{Ramsey}}^2$	0.735(0.359)	0.793(0.219)
${\chi }_{\mathit{Serial}}^2$	0.479(0.579)	0.649(0.429)

Note.

** Depicts significance at 5% level of significance.

Source: Authors Estimation.