The Relationship Between the Government’s Non-Pharmaceutical Interventions During the Period of the Spread of the Covid-19 Virus and the Iran Stock Market: The Role of Public Vaccination

Document Type : Research Article

Authors

1 Associate Professor, Department of Economics, Faculty of Economics Sciences and Administrative, University of Mazandaran, Babolsar, Iran

2 PhD student in economics, Department of Economics, Faculty of Economics Sciences and Administrative, University of Mazandaran, Babolsar, Iran

3 MA. in Economics, Department of Economics, Faculty of Advance Engineering, University of Science and Technology, Tehran, Iran.

Abstract

Following the spread of the Covid-19 virus at the end of 2019, governments have used a series of strict policies and non-pharmaceutical interventions (NPI) such as social distancing and mandatory quarantines to deal with the increasing spread of this virus, and therefore the trading process of global markets, Including the stock market, it was severely affected. In the following, the start of public vaccination affected various industries and groups and led to changes in stock market transactions of countries, including the Tehran Stock Exchange. The present study, by applying the Smooth transmission regression (STR) nonlinear model and daily data during the period of the Covid-19 epidemic (30 February 2018 to 10 January 2018), investigates the role of public vaccination in the relationship between the interventionist policies of the government and the stock market. In the present study, relying on tests to detect nonlinear behavior, the existence of a nonlinear relationship between government interventions and the stock market index was confirmed, the variable of the number of vaccinated people was selected as a suitable transition variable, and the nonlinear smooth transition regression model with a two-regime logistic transfer function With one transfer (LSTR1) was considered as the proposed model for this relationship. The results of the estimation of the research model show that the increase of strict measures of the government in the form of a two-regime structure with a threshold level of 20857, the number of vaccinated people in the first regime (that is, when the number of vaccinated people is less than the threshold value (20857)) had a positive and significant effect on the stock market index, but after crossing the threshold level and entering the second regime (that is, when the number of vaccinated people is greater than its threshold value (20857)), the mentioned variable had a negative and significant impact on the stock market index.

Keywords

Main Subjects

References

- رضاقلی‌زاده، مهدیه؛ و کیوان‌پور، ملیحه، (1398). «نقش توسعه مالی در رابطه بین تغییرات قیمت نفت و حساب‌جاری در ایران: کاربرد الگوی غیرخطی رگرسیون انتقال ملایم (STR)». پژوهش‌های اقتصادی ایران، 24 (81): 134-91. https://doi.org/10.22054/ijer.2019.11687
- رضاقلی‌زاده، مهدیه؛ جعفری، حسین؛ عبدالحسینی، مرتضی، (1402). «بررسی تاثیر اقتصادی مداخلات غیردارویی دولت‌ها طی دوره شیوع ویروس کووید-19: مقایسه کشورهای توسعه یافته و در حال توسعه». سیاست‌گذاری اقتصادی، (29)15: 40-79.  https://doi.org/10.22034/epj.2023.20074.2435
- Abdullah, M., Wali Ullah, G. M. & Chowdhury, M. A. F., (2022). “The asymmetric effect of COVID-19 government interventions on global stock markets: New evidence from QARDL and threshold regression approaches”. Investment Analysts Journal, 51(4): 268-288.‏ https://doi.org/10.1080/10293523.2022.2112665.
- Aggarwal, S., Nawn, S. & Dugar, A., (2021). “What caused global stock market meltdown during the COVID pandemic–Lockdown stringency or investor panic?”. Finance research letters, 38: 101827.‏ https://doi.org/10.1016/j.frl.2020.101827.
- Aharon, D. Y. & Siev, S., (2021). “COVID-19, government interventions and emerging capital markets performance”. Research in International Business and Finance, 58: 101492.‏ https://doi.org/10.1016/j.ribaf.2021.101492.
- Al-Awadhi, A. M., Alsaifi, K., Al-Awadhi, A. & Alhammadi, S., (2020). “Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns”. Journal of behavioral and experimental finance, 27: 100326.‏ https://doi.org/10.1016/j.jbef.2020.100326.
- Alexakis, C., Eleftheriou, K. & Patsoulis, P., (2021). “COVID-19 containment measures and stock market returns: An international spatial econometrics investigation”. Journal of Behavioral and Experimental Finance, 29: 100428.‏ https://doi.org/10.1016/j.jbef.2020.100428.
- Apergis, N., Mustafa, G. & Malik, S., (2022). “COVID-19 pandemic, stock returns, and volatility: the role of the vaccination program in Canada”. Applied Economics, 54(42): 4825-4838.‏ https://doi.org/10.1080/00036846.2022.2036688.
- Ashraf, B. N., (2020). “Stock markets’ reaction to COVID-19: Cases or fatalities?”. Research in International Business and Finance, 54: 101249.‏ https://doi.org/10.1016/j.ribaf.2020.101249.
- Ashraf, B. N. & Goodell, J. W., (2022). “COVID-19 social distancing measures and economic growth: Distinguishing short-and long-term effects”. Finance Research Letters, 47: 102639.‏ https://doi.org/10.1016/j.frl.2021.102639.
- Baker, S. R., Bloom, N., Davis, S. J., Kost, K., Sammon, M. & Viratyosin, T., (2020). “The unprecedented stock market reaction to COVID-19”. The review of asset pricing studies, 10(4): 742-758.‏ https://doi.org/10.1093/rapstu/raaa008.
- Bakry, W., Kavalmthara, P. J., Saverimuttu, V., Liu, Y. & Cyril, S., (2022). “Response of stock market volatility to COVID-19 announcements and stringency measures: A comparison of developed and emerging markets”. Finance research letters, 46: 102350. https://doi.org/10.1016/j.frl.2021.102350.
- Banik, R., Rahman, M., Hossain, M. M., Sikder, M. T. & Gozal, D., (2020). “COVID-19 pandemic and Rohingya refugees in Bangladesh: What are the major concerns?”. Global Public Health, 15(10): 1578-1581.‏ https://doi.org/10.1080/17441692.2020.1812103.
- Boone, L., Haugh, D., Pain, N. & Salins, V., (2020). “Tackling the fallout from COVID-19”. Economics in the Time of COVID-19, 37: 44.‏ https://cepr.org/publications/books-and-reports/economics-time-covid-19.
- Caporale, G. M., Kang, W. Y., Spagnolo, F. & Spagnolo, N., (2022). “The Covid-19 pandemic, policy responses and stock markets in the G20”. International Economics, 172: 77-90.‏ https://doi.org/10.1016/j.inteco.2022.09.001.
- Chen, C. D., Chen, C. C., Tang, W. W. & Huang, B. Y., (2009). “The positive and negative impacts of the SARS outbreak: A case of the Taiwan industries”. The Journal of Developing Areas: 281-293.‏ https://www.jstor.org/stable/40376284.
- Chen, R. E., Zhang, X., Case, J. B., Winkler, E. S., Liu, Y., VanBlargan, L. A., ... & Diamond, M. S., (2021). “Resistance of SARS-CoV-2 variants to neutralization by monoclonal and serum-derived polyclonal antibodies”. Nature medicine, 27(4): 717-726. https://doi.org/10.1038/s41591-021-01294-w.
- Craven, M., Liu, L., Mysore, M. & Wilson, M., (2020). “COVID-19: Implications for business”. McKinsey & Company: 8.‏
- Edejer, T. T. T., Hanssen, O., Mirelman, A., Verboom, P., Lolong, G., Watson, O. J., ... & Soucat, A., (2020). “Projected health-care resource needs for an effective response to COVID-19 in 73 low-income and middle-income countries: a modelling study”. The Lancet Global Health, 8(11): e1372-e1379.‏ https://doi.org/10.1016/S2214-109X(20)30383-1.
- Engelhardt, N., Krause, M., Neukirchen, D. & Posch, P. N., (2021). “Trust and stock market volatility during the COVID-19 crisis”. Finance Research Letters, 38: 101873.‏ https://doi.org/10.1016/j.frl.2020.101873.
- Fama, E. F., (1970). “Efficient capital markets: A review of theory and empirical work”. The journal of Finance, 25(2): 383-417.‏ https://doi.org/10.2307/2325486.
- Goodell, J. W., (2020). “COVID-19 and finance: Agendas for future research”. Finance Research Letters, 35: 101512. https://doi.org/10.1016/j.frl.2020.101512.
- Granger, C. W. & Terasvirta, T., (1993). “Modelling non-linear economic relationships”. OUP Catalogue.‏ https://doi.org/10.2307/1060764.
- Greenstone, M. & Nigam, V., (2020). “Does social distancing matter?”. University of Chicago, Becker Friedman Institute for Economics Working Paper, (2020-26).‏ https://dx.doi.org/10.2139/ssrn.3561244.
- Gros, D., Ounnas, A. & Yeung, T. Y. C., (2021). “A new COVID policy stringency index for Europe”. Covid Economics: 115.‏ https://cepr.org/publications/covid-economics-issue-66#392514_392942_390711.
- Gu, J., Yue, X. G., Nosheen, S. & Shi, L., (2022). “Does more stringencies in government policies during pandemic impact stock returns? Fresh evidence from GREF countries, a new emerging green bloc”. Resources Policy, 76: 102582.‏ https://doi.org/10.1016/j.resourpol.2022.102582.
- Hale, T., Angrist, N., Kira, B., Petherick, A., Phillips, T. & Webster, S., (2020). “Variation in government responses to COVID-19”.‏ https://doi.org/10.1371/journal.pone.0253116.
- Hong, H. & Stein, J. C., (2003). “Differences of opinion, short-sales constraints, and market crashes”. The Review of Financial Studies, 16(2): 487-525.‏ https://www.jstor.org/stable/1262683.
- Hong, H., Wang, N. & Yang, J., (2021). “Implications of stochastic transmission rates for managing pandemic risks”. The Review of Financial Studies, 34(11): 5224-5265.‏ https://doi.org/10.1093/rfs/hhaa132.
- Ichev, R. & Marinč, M., (2018). “Stock prices and geographic proximity of information: Evidence from the Ebola outbreak”. International Review of Financial Analysis, 56: 153-166.‏ https://doi.org/10.1016/j.irfa.2017.12.004.
- Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), (2020). “Workshop Report on Biodiversity and Pandemics of the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES)”. IPBES Secretariat.‏ https://doi.org/10.5281/zenodo.4147317.
- Izzahdi, H. Q. & Suryani, A. W., (2023). “Covid-19 Vaccination, Government Strict Policy and Capital Market Volatility: Evidence From Asean Countries”. Economic Studies, 32(2):‏ https://doi.org/19.5.440/UN32.20.1/LT/2022.
- Jiang, Y., Zhang, Y., Ma, C., Wang, Q., Xu, C., Donovan, C., ... & Sun, W., (2017). “H7N9 not only endanger human health but also hit stock marketing”. Advances in disease control and prevention, 2(1): 1. https://doi.org/10.25196/adcp201711.
- Kheni, S. & Kumar, S., (2021). “Cases, deaths, stringency indexes and Indian financial market—empirical evidence during Covid-19 pandemic”. Annals of Financial Economics, 16(02): 2150009.‏ https://doi.org/10.1142/S2010495221500093.
- Koh, D. & Goh, H. P., (2020). “Occupational health responses to COVID-19: What lessons can we learn from SARS?”. Journal of occupational health, 62(1): e12128.‏ https://doi.org/10.1002/1348-9585.12128.
- Kohlscheen, E., Mojon, B. & Rees, D., (2020). “The macroeconomic spillover effects of the pandemic on the global economy”. Available at SSRN 3569554.‏ https://dx.doi.org/10.2139/ssrn.3569554.
- Liu, H., Manzoor, A., Wang, C., Zhang, L. & Manzoor, Z., (2020). “The COVID-19 outbreak and affected countries stock markets response”. International Journal of Environmental Research and Public Health, 17(8): https://doi.org/10.3390/ijerph17082800.
- Liu, Y., Gayle, A. A., Wilder-Smith, A. & Rocklöv, J., (2020). “The reproductive number of COVID-19 is higher compared to SARS coronavirus”. Journal of travel medicine, 27 (2) https://doi.org/10.1093/jtm/taaa021.
- Ma, C., Rogers, J. H. & Zhou, S., (2020). “Global economic and financial effects of 21st century pandemics and epidemics”. Covid Economics, 5: 56-78.‏ https://doi.org/10.2139/ssrn.3565646.
- Marozzi, M., (2016). “Construction, robustness assessment and application of an index of perceived level of socio-economic threat from immigrants: A study of 47 European countries and regions”. Social Indicators Research, 128(1): 413-437.‏https://doi.org/ 10.1007/s11205-015-1037-z.
- McKibbin, W. & Fernando, R., (2021). “The global macroeconomic impacts of COVID-19: Seven scenarios”. Asian Economic Papers, 20(2): 1-30.‏ ‏https://doi.org/ 10.1162/asep_a_00796.
- Mishra, R., Sharma, R., Karedla, Y. & Patel, N., (2022). “Impact of COVID-19 Cases, Deaths, Stringency and Vaccinations on the US Stock Market”. Vision, 09722629221074901.‏ http://dx.doi.org/10.1177/09722629221074901.
- Mofijur, M., Fattah, I. R., Alam, M. A., Islam, A. S., Ong, H. C., Rahman, S. A., ... & Mahlia, T. M. I., (2021). “Impact of COVID-19 on the social, economic, environmental and energy domains: Lessons learnt from a global pandemic”. Sustainable production and consumption, 26: 343-359.‏ https://doi.org/10.1016/j.spc.2020.10.016.
- Nelson, M. A., (2021). “COVID-19 closure and containment policies: A first look at the labour market effects in emerging nations”. Covid Economics, 66: 89-114.‏ https://doi.org/10.1111/caje.12549.
- Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Iosifidis, C., ... & Agha, R., (2020). “The socio-economic implications of the coronavirus pandemic (COVID-19): A review”. International journal of surgery, 78: 185-193.‏ https://doi.org/10.1016/j.ijsu.2020.04.018.
- Nippani, S. & Washer, K. M., (2004). “SARS: a non-event for affected countries’ stock markets?”. Applied Financial Economics, 14(15): 1105-1110.‏ https://doi.org/10.1080/0960310042000310579.
- Ozili, P. K. & Arun, T., (2020). “Spillover of COVID-19: impact on the Global Economy”. In Managing Inflation and Supply Chain Disruptions in the Global Economy (pp. 41-61). IGI Global.‏ https://dx.doi.org/10.2139/ssrn.3562570.
- Ramelli, S. & Wagner, A. F., (2020). “Feverish stock price reactions to COVID-19”. The Review of Corporate Finance Studies, 9(3): 622-655.‏ https://doi.org/10.1093/rcfs/cfaa012.
- Rezagholizadeh, M. & keyvanpor, M., (2019). “The Role of Financial Development in the Relationship of Oil Price Fluctuations and Current Account in Iran: Nonlinear Smooth Transition Regression Model (STR)”. Iranian Journal of Economic Research, 24(81): 91-134. https://doi.org/10.22054/ijer.2019.11687. (In Persian).
- Rezagholizadeh, M., Jafari, H. & Abdolhosseiny, M., (2023). “Investigating the economic impact of non-pharmaceutical interventions by governments during the outbreak of the Covid-19 virus: Comparison of developed and developing countries”. The Journal of Economic Policy, 15(29): 40-79. https://doi.org/10.22034/epj.2023.20074.2435. (In Persian).
- Rouatbi, W., Demir, E., Kizys, R. & Zaremba, A., (2021). “Immunizing markets against the pandemic: COVID-19 vaccinations and stock volatility around the world”. International review of financial analysis, 77: 101819.‏ https://doi.org/10.1016/j.irfa.2021.101819.
- Rubbaniy, G., Khalid, A. A., Umar, M. & Mirza, N., (2020). “European stock markets’ response to Covid-19, lockdowns, government response stringency and Central banks’ interventions. Lockdowns, Government Response Stringency and Central Banks’ Interventions” (December 31, 2020).‏ http://dx.doi.org/10.2139/ssrn.3758227.
- Saif-Alyousfi, A. Y., (2022). “The impact of COVID-19 and the stringency of government policy responses on stock market returns worldwide”. Journal of Chinese Economic and Foreign Trade Studies.‏ https://doi.org/10.1108/JCEFTS-07-2021-0030.
- Shoss, M., (2021). “Occupational health psychology research and the COVID-19 pandemic”. Journal of Occupational Health Psychology, 26(4): 259.‏ https://doi.org/10.1037/ocp0000292.
- Su, C. W., Dai, K., Ullah, S. & Andlib, Z., (2021). “COVID-19 pandemic and unemployment dynamics in European economies”. Economic Research-Ekonomska Istraživanja: 1-13.‏ https://doi.org/10.1080/1331677X.2021.1912627.
- Takian, A., Kiani, M. M. & Khanjankhani, K., (2020). “COVID-19 and the need to prioritize health equity and social determinants of health”. International journal of public health, 65(5): 521-523.‏ https://doi.org/10.1007/s00038-020-01398-z.
- Tao, R., Su, C. W., Yaqoob, T. & Hammal, M., (2021). “Do financial and non-financial stocks hedge against lockdown in Covid-19? An event study analysis”. Economic Research-Ekonomska Istraživanja, 1-22.‏ https://doi.org/10.1080/1331677X.2021.1948881.
- Teräsvirta, T., (1994). “Specification, estimation, and evaluation of smooth transition autoregressive models”. Journal of the american Statistical association, 89(425): 208-218.‏ https://doi.org/10.2307/2291217.
- Terasvirta, T. & Anderson, H. M., (1992). “Characterizing nonlinearities in business cycles using smooth transition autoregressive models”. Journal of applied econometrics, 7(S1): S119-S136.‏ https://doi.org/10.1002/jae.3950070509.
- Thunstrom, L., Newbold, S. C., Finnoff, D., Ashworth, M. & Shogren, J. F., (2020). “The benefits and costs of using social distancing to flatten the curve for COVID-19”. Journal of Benefit-Cost Analysis, 11(2): 179-195.‏ https://doi.org/10.1017/bca.2020.12.
- To, B. C. N., Nguyen, B. K. Q. & Nguyen, T. V. T., (2023). “When the market got the first dose: Stock volatility and vaccination campaign in COVID-19 period”. Heliyon, e12809.‏ https://doi.org/10.1016/j.heliyon.2023.e12809.
- Uddin, M., Chowdhury, A., Anderson, K. & Chaudhuri, K., (2021). “The effect of COVID–19 pandemic on global stock market volatility: can economic strength help to manage the uncertainty?”. Journal of Business Research, 128: 31-44.‏ https://doi.org/10.1016/j.jbusres.2021.01.061.
- Umar, M., Mirza, N., Rizvi, S. K. A. & Furqan, M., (2021). “Asymmetric volatility structure of equity returns: Evidence from an emerging market”. The Quarterly Review of Economics and Finance.‏ http://dx.doi.org/10.1016/j.qref.2021.04.016.
- Van Dijk., (1999). “Ideología. Una aproximación multidisciplinaria”. Barcelona: Gedisa. Sociolinguistic Studies: 107-116.‏ https://doi.org/10.15581/008.15.27326.
- Wagner, A. F., (2020). “What the stock market tells us about the post-COVID-19 world”. Nature Human Behaviour, 4(5): 440-440.‏ https://doi.org/10.1038/s41562-020-0869-y.
- Wang, J., Umar, M., Afshan, S. & Haouas, I., (2021). “Examining the nexus between oil price, COVID-19, uncertainty index, and stock price of electronic sports: fresh insights from the nonlinear approach”. Economic Research-Ekonomska Istraživanja: 1-17.‏ https://doi.org/10.1080/1331677X.2021.1937260.
- Yan, B., Zhang, X., Wu, L., Zhu, H. & Chen, B., (2020). “Why do countries respond differently to COVID-19? A comparative study of Sweden, China, France, and Japan”. The American review of public administration, 50(6-7): 762-769.‏ https://doi.org/10.1177/0275074020942445.
- Yang, H. & Deng, P., (2021). “The impact of COVID-19 and government intervention on stock markets of OECD countries”. Asian Economics Letters, 1(4): 18646.‏ https://doi.org/10.46557/001c.18646.
- Yu, X. & Xiao, K., (2023). “COVID-19 Government restriction policy, COVID-19 vaccination and stock markets: Evidence from a global perspective”. Finance Research Letters, 53, 103669.‏ https://doi.org/10.1016/j.frl.2023.103669.
- Zhang, D., Hu, M. & Ji, Q., (2020). “Financial markets under the global pandemic of COVID-19”. Finance research letters, 36, 101528.‏ https://doi.org/10.1016/j.frl.2020.101528.
Journal of Applied Economics Studies in Iran
Volume 13, Issue 50
August 2024
Pages 169-199

Files

Share

How to cite

Statistics