Spillover of COVID-19: impact on the Global Economy

Abstract

How did a health crisis translate to an economic crisis? Why did the spread of the coronavirus bring the global economy to its knees? The answer lies in two methods by which coronavirus stifled economic activities. First, the spread of the virus encouraged social distancing which led to the shutdown of financial markets, corporate offices, businesses and events. Second, the exponential rate at which the virus was spreading, and the heightened uncertainty about how bad the situation could get, led to flight to safety in consumption and investment among consumers, investors and international trade partners. We focus on the period from the start of 2020 through March when the coronavirus began spreading into other countries and markets. We draw on real-world observations in assessing the restrictive measures, monetary policy measures, fiscal policy measures and the public health measures that were adopted during the period. We empirically examine the impact of social distancing policies on economic activities and stock market indices. We also empirically the effect of COVID infection cases and COVID deaths on macroeconomic performance during the 2020 to 2021 period. The findings reveal that the increasing number of lockdown days, monetary policy decisions and international travel restrictions severely affected the level of economic activities and the closing, opening, lowest and highest stock price of major stock market indices. We also find that the rising number of COVID cases and rising death cases led to a significant increase in global inflation rate, global unemployment rate, and global energy commodity index.

Full text

Spillover of COVID-19: impact on the Global Economy
Peterson K. Ozili, Central Bank of Nigeria
Thankom G. Arun, University of Essex, United Kingdom
Abstract
How did a health crisis translate to an economic crisis? Why did the spread of the coronavirus
bring the global economy to its knees? The answer lies in two methods by which coronavirus
stifled economic activities. First, the spread of the virus encouraged social distancing which led to
the shutdown of financial markets, corporate offices, businesses and events. Second, the
exponential rate at which the virus was spreading, and the heightened uncertainty about how bad
the situation could get, led to flight to safety in consumption and investment among consumers,
investors and international trade partners. We focus on the period from the start of 2020 through
March when the coronavirus began spreading into other countries and markets. We draw on real-
world observations in assessing the restrictive measures, monetary policy measures, fiscal policy
measures and the public health measures that were adopted during the period. We empirically
examine the impact of social distancing policies on economic activities and stock market indices.
We also empirically the effect of COVID infection cases and COVID deaths on macroeconomic
performance during the 2020 to 2021 period. The findings reveal that the increasing number of
lockdown days, monetary policy decisions and international travel restrictions severely affected
the level of economic activities and the closing, opening, lowest and highest stock price of major
stock market indices. We also find that the rising number of COVID cases and rising death cases
led to a significant increase in global inflation rate, global unemployment rate, and global energy
commodity index.
JEL classification: G21, G28, I11, I18
Keywords: COVID-19, Coronavirus, SARS-CoV-2, outbreak, social distancing, pandemic,
financial crisis, global recession, public health, spillovers, monetary policy, fiscal policy, liquidity
provision, Central banks, energy, unemployment, inflation, GDP growth, Omicron, Delta variant,
Deltacron.

2
1. Introduction
This paper explores the spillover effect of COVID-19 on the global economy. In 2019, there was
anxiety about the impact of a US-China trade war, the US presidential elections and Brexit on the
World Economy. On account of these, the IMF had predicted moderated global growth of 3.4
percent. COVID emerged in late 2019, and was declared a pandemic in January 2020. COVID-19
– the disease caused by SARS-CoV-2 – metamorphosed into the Delta variant in 2021, the omicron
variant in 2021 and the Deltacron variant in 2022. The emergence of COVID-19 unexpectedly
changed global outlook. Due to fear and uncertainty, and to rational assessment that firms’ profits
are likely to be lower due to the impact of COVID-19, global stock markets erased about US$6
trillion in wealth in one week from 24th to 28th of February of 2020. The S&P 500 index lost over
$5 trillion in value in the same week in the US while the S&P 500’s largest 10 companies
experienced a combined loss of over $1.4 trillion,
1
although some of these were recovered in the
subsequent week. Some of the loss in value was due to rational assessment by investors that firms’
profits would decline due to the impact of the coronavirus.
The International Air Transportation Association (IATA) stated that the air travel industry would
lose US$113 billion if the COVID-19 outbreak was not quickly contained
2
. The IMF downgraded
its growth projection for the global economy as the COVID-19 outbreak threw its earlier projection
into serious doubt. The tourism industry was affected as the travel opportunities for Chinese
tourists, who usually spend billions annually, were severely curtailed. There were increased flight
cancellations, cancelled hotel bookings and cancelled local and international events worth over
$200billion. The flow of goods through global supply chains vastly reduced significantly given
that China was the world’s largest manufacturer and exporter, and the Chinese government ordered
the closure of major factories in the country. Countries like Iran, Italy and France issued stay-at-
home nationwide policies to control the spread of the virus, which had already caused multiple
deaths and was putting pressure on the national public healthcare infrastructure. Such stay-at-home
policies planted the seeds of recession in developed countries, and there was a general consensus
among economists that the coronavirus pandemic would plunged the world into a global recession
1
https://www.reuters.com/article/us-health-coronavirus-stocks-carnage/coronavirus-then-oil-collapse-erase-5-
trillion-from-u-s-stocks-idUSKBN20W2TJ
2
IATA: https://airlines.iata.org/news/potential-for-revenue-losses-of-113bn-due-to-covid-19-
%E2%80%9Ccrisis%E2%80%9D

3
(Financial Times, 2020).
3
The International Monetary Fund in March stated that it expected a
global recession that would be at least as bad as the 2007-8 global financial crisis followed by a
recovery in 2021. (Georgieva, 2020)
4
.
The literature on the cause of recessions is vast (see Jagannathan et al, 2013; Stiglitz, 2010; Gaiotti,
2013; Bezemer, 2011; Mian and Sufi, 2010; Bentolila et al, 2018; Bagliano and Morana, 2012).
But the cause of the 2020 global recession was novel in modern history. The coronavirus triggered
a new type of recession that was different from the past triggers of a recession. For instance, the
Asian debt crisis of 1997 was caused by the collapse of the Thai baht in July 1997, which created
panic that caused a region-wide financial crisis and economic recession in Asia (Radelet and Sachs,
1998). The 2008 global financial crisis, which translated to a recession, was caused by loose
monetary policy which created a bubble, followed by subprime mortgages, weak regulatory
structures, and high leverage in the banking sector (Allen and Carletti, 2010). The 2016 recession
in Nigeria was caused by the fall in the price of crude oil, balance of payment deficit, adoption of
a fixed-float exchange rate regime, an increase in the pump price of petrol, activities of pipeline
vandals and infrastructure weaknesses. The 2010 recession in Greece was caused by the after-
effect of the global financial crisis, structural weaknesses in the Greek economy, and lack of
monetary policy flexibility as a member of the Eurozone (Rady, 2012).
In this paper, we show how the coronavirus outbreak led to spillovers into major sectors of the
global economy, and how fast policy response by several governments either triggered and
prolonged the recession while trying to save the lives of citizens. We also investigate the effect of
social distancing policies on the level of economic activities and stock index prices.
The discussion in this paper contributes to the financial crisis and pandemic literature (Allen and
Carletti, 2010; Jagannathan et al, 2013; Mian and Sufi, 2010; Stiglitz, 2010; Ozili, 2020a). This
paper contributes to the literature by showing that non-financial factors and/or non-economic
factors can trigger both a financial and economic meltdown in unprecedented ways. The
implication for financial stability is that future stress testing of the resilience of the financial system
3
Financial Times: Global recession already here, say top economists. https://www.ft.com/content/be732afe-6526-
11ea-a6cd-df28cc3c6a68
4
Fortune: https://fortune.com/2020/03/23/coronavirus-economic-impact-predictions-great-recession-2020-markets-
imf/

4
should take into account human health factors as an important element in their stress testing
exercises.
The rest of the paper is structured in the following way. Section 2 shows a representation of the
spread of COVID-19 in some countries and regions. Section 3 discusses the global spillovers.
Section 4 shows the various fast policy responses adopted in several countries during the
pandemic. Section 5 highlight some of the issues of the fast policy actions taken during the 2020
pandemic. Section 6 presents the empirical analysis. Section 7 concludes.
2. Spread of COVID-19
Table 1 reports the real-time data on the spread of the coronavirus (or COVID-19) based on data
obtained from Worldometer. The data shows that the United States had the highest number of
confirmed cases, confirmed deaths and total recovery from COVID, infected individuals, followed
by India, Brazil, France, the United Kingdom and Germany as at 17rd of March 2022. The statistics
is reported in Table 1.
Table 1: Top 20 countries COVID-19 statistics as at 17th March 2022
Country
Confirmed cases
(Total)
Confirmed Deaths
(Total)
Recovered
(Total)
World
464,655,799
6,082,998
396,971,917
1
USA
81,289,602
994,739
56,631,117
2
India
43,001,477
516,162
42,454,546
3
Brazil
29,478,039
656,003
28,063,760
4
France
23,758,447
140,613
22,394,358
5
UK
19,911,115
163,248
18,473,970
6
Germany
17,843,545
126,248
14,142,500
7
Russia
17,484,257
363,039
15,934,645
8
Turkey
14,623,028
96,853
14,245,809
9
Italy
13,563,466
157,314
12,351,985
10
Spain
11,260,040
101,416
10,502,784
11
Argentina
8,985,836
127,334
8,791,259
12
Netherlands
7,327,235
21,736
5,767,747
13
Iran
7,135,719
139,387
6,805,081
14
Vietnam
6,820,458
41,607
3,547,488
15
Colombia
6,078,487
139,361
6,805,081
16
Indonesia
5,939,082
153,212
5,523,393
17
Japan
5,911,813
26,600
5,344,759

5
18
Poland
5,863,414
113,980
4,912,654
19
Mexico
5,619,780
321,619
4,912,654
20
Malaysia
3,900,433
34,099
3,567,003
Source: Worldometer.5 Note that there may be unconfirmed cases which were never reported to
the public health authorities.
Data from the World Health Organisation in table 2 showed that the COVID pandemic affected
each region differently as at 17th March 2022. For example, the European region had the largest
spread of COVID, amounting to 41% of total confirmed cases and 31% of total deaths due to
COVID. The Americas had the second largest spread of COVID, amounting to 32% of total
confirmed cases and 45% of total deaths due to COVID. The eastern Mediterranean region and the
African region recorded the lowest number of confirmed cases while the Western Pacific region
and the African region recorded the lowest number of total deaths. The African region had the
lowest spread of COVID, amounting to 2% of total confirmed cases and 3% of total deaths due to
COVID.
Table 2: WHO Regional Situation Report in Numbers as of 17th March 2022
Region
Confirmed cases
Total Deaths
World
460,280,168
6,050,018
European region
189,964,699
1,910,254
Region of the Americas
149,185,071
2,663,778
Eastern Mediterranean
21,466,737
338,737
Western Pacific Region
34,575,245
196,313
South East Asia
56,686,444
770,289
African region
8,501,208
170,634
Source: Situation by region report of the World Health Organisation6
5
https://www.worldometers.info/coronavirus/#countries
6
https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200325-sitrep-65-covid-
19.pdf?sfvrsn=ce13061b_2

6
3. Global Spillover
Initially, the perception was that the COVID-19 pandemic would be localized in China only. It
later spread across the world through the movement of people. The economic pain became severe
as people were asked to stay at home. The effect of the pandemic became was felt in various sectors
of the economy with travel bans affecting the aviation industry, sporting event cancellations
affecting the sports industry, the prohibition of mass gatherings affecting the events and
entertainment industries (Horowit, 2020; Elliot, 2020).
There are parallels between the COVID-19 crisis and the events of 2007-2008: as in 2020, many
people in the earlier recession assumed the impacts would largely be localized (in that case based
on an assumption that the subprime mortgage crisis would be a relatively minor problem affecting
only the US, but ultimately affecting the global financial system) (Elliot, 2020). The sudden
economic disruption caused by COVID-19 is not only destructive but also has spillover
implications because it created demand and supply shocks in almost every area of human endeavor
(El-Erian, 2020; Ozili, 2020b)
7
3.1. Spillover to the travel industry
The coronavirus outbreak led the governments of many countries to impose restrictions on non-
essential travel to countries affected by COVID-19, indefinitely suspending tourism travel, work
visas and immigrant visas. Some countries placed a complete travel ban on all forms of inward or
outward travel, shutting down all airports in the country. At the height of the coronavirus
pandemic, most airplanes flew almost empty due to mass passenger cancellations. The travel
restrictions imposed by governments subsequently led to the reduction in the demand for all forms
of travel which forced some airlines to temporarily suspend operations such as Air Baltic, LOT
Polish Airlines, La Compagnie, and Scandinavian Airlines. Such travel restrictions cost the
tourism industry alone a loss of over $200 billion globally, excluding other loss of revenue for
tourism travel, and were forecast to cost the aviation industry a total loss of $113billion according
to IATA.
8
In 2020 alone, the pandemic triggered a 75% decline in international tourist arrivals
compared with the same period in 2019. The airlines that were affected sought bailout support
7
Foreign Affairs: https://www.foreignaffairs.com/articles/2020-03-17/coming-coronavirus-recession
8
https://www.iata.org/en/pressroom/pr/2020-03-05-01/

7
from the government. US airlines sought a $50bn bailout fund for the US Airline industry alone.
9
The GTBA reported that the business travel sector would lose $820 billion in revenue due to the
coronavirus pandemic.
10
3.2. Spillover to the hospitality industry
Restaurant businesses have been affected during the pandemic mainly through the government-
announced ‘stay-at-home policy’ and ‘social distancing’ movement restriction imposed by the
government in many countries. This led to rapid shutdowns in cities and states to control the spread
of the coronavirus, which threw many restaurants and hotels across the country into sudden shock.
Hotels across the world witnessed booking cancellations worth billions of dollars, and the hotel
industry sought a $150bn bailout.
11
Restaurant executives laid off staff as they shut down their
businesses temporarily. Many customers stayed at home, preferring to eat cooked meals at home.
Some restaurant executives criticized the government for imposing the stay-at-home and social
distancing policy which destroyed many small restaurants and pub businesses in small cities. They
argued that governments’ announcement of stay-at home policies or social distancing policies was
an indirect way of telling people not to come to the pubs, hotels and restaurants, which was a way
of silently destroying the hospitality industry during the pandemic.
12
Multiple hotels in the US,
UK and in some European counties announced the temporary suspension of normal operations
which puts the estimated loss of jobs to 24.3 million globally, and 3.9 million in the US alone
13
due to the decline in hotel occupancy during the pandemic period. The economic impact of the
pandemic on the hotel industry was more severe than the 9/11 and 2008 recessions combined.
9
https://www.wsj.com/articles/airlines-seek-up-to-50-billion-in-government-aid-amid-coronavirus-crisis-
11584378242
10
https://www.nytimes.com/reuters/2020/03/11/business/11reuters-health-coronavirus-business-travel.html
11
https://www.axios.com/hotel-industry-150-billion-coronavirus-relief-34910e41-2402-4260-b4b9-
8f5b738db664.html
12
https://thebristolcable.org/2020/03/bristol-coronavirus-businesses-impact-food-restaurants-pubs-government-
threw-us-under-bus/
13
According to the American Hotel and Lodging Association.
https://www.ahla.com/covid-19s-impact-hotel-industry

8
3.3. Spillover to the sports industry
The sports industry was severely affected during the 2020 coronavirus outbreak. The pandemic
led to the cancellation of many sporting events. In the football segment, major European football
leagues in England and Scotland announced the immediate suspension of football matches for 6
weeks until 30th April. The Turkish super league was the last major European league to suspend
its matches. In Formula One, the Monaco Grand Prix was cancelled. The Tokyo Summer Olympic
and Paralympic games were postponed. In the hockey segment, the 2020 hockey games in England
was postponed. England's FIH Pro League games scheduled for 2nd to 3rd and 16th to 17th May
were postponed. In rugby games, the Pro14 final scheduled for 20th June at the Cardiff City
Stadium was cancelled. The major league rugby (MLR) was cancelled for the remainder of the
2020 season. In the baseball segment, all major baseball league season games were called off in
Mexico and Puerto Rico. The Motorsport game in Portugal was postponed after the Portuguese
government declared a state of emergency and suspended all sporting events in the country. In the
snooker segment, the World snooker championship to be held in Sheffield from 18th April to 4th
May, was postponed. In the swimming segment, the 2020 European Aquatics Championship
scheduled for 11th to 24th in Hungary was postponed until August. In the golf segment, the LPGA
tour was rescheduled for 10th to 13th September 2020. The resulting loss in revenue to the
sponsors and organizers of the cancelled games ran into billions of dollars. Sporting events
resumed in many countries in 2021 and 2022. But there were partial restrictions on the amount of
participants in sport venues and the compulsory wearing of face masks at sport events.
3.4. Spillover to oil-dependent countries
3.4.1. The oil price war: a contributing factor
Early in 2020, the price of oil fell due to the oil price war between Russia and Saudi Arabia. The
coronavirus pandemic worsened the situation through the reduction in the demand for oil. The
imposed travel restrictions during the pandemic, which led to a reduction in the movement of
people and goods, resulted in a fall in demand for aviation fuel, coal and other energy products,
which subsequently led to a fall in oil price due to low demand. The coronavirus crisis also affected
a wide range of energy markets such as the coal, gas and renewable energy markets, but its impact
on oil markets was more severe because it stopped the movement of people and goods, which led
to a drastic decline in the demand for transport fuels. When Saudi Arabia later supplied excess oil

9
to the world, the market was flooded with too much oil, exceeding demand during the COVID-19
pandemic, and subsequently leading to a fall in oil price.
3.4.2. Loss of oil revenue to oil-dependent countries
The effect of the pandemic on oil-dependent countries was severe. The global decline in oil price
combined with the low demand for oil products in the international market led to a significant
shortfall in oil revenue to oil-dependent countries, which increased current account deficits and
worsened the balance of payment position of many oil-dependent countries such as Venezuela,
Angola and Nigeria. These countries also faced increasing pressure on their foreign exchange
reserves, which subsequently led to the devaluation of local currencies against the dollar. Countries
like Kenya, Nigeria and South Africa experienced a reduction in the price of petrol in the local gas
stations. National budgets were also affected. The sustained decline in global oil price due to the
COVID-19 pandemic meant that the current national budget became outdated for most oil-
dependent countries, and had to be revised because it did not reflect the current economic reality
since the budget was priced at a higher oil price from 2019. Consequently, the national budget of
some oil-dependent countries ran into massive deficits which forced some countries to either (i)
seek foreign loan from the IMF, World Bank and other lenders to fund their budget deficits, or (ii)
create a new budget that was priced using the current low oil price in the global market.
3.5. Spillover to import-dependent countries
Many import-dependent countries were severely affected during the early stages of the coronavirus
pandemic. Many countries imported their essential commodities from major exporting countries
like China, India and Japan, and depend largely on these countries for the consumption of essential
commodities. The reduction in goods flowing through the global supply chain, and substantial
reliance on China for imported goods, led to shortages of supplies to import-dependent countries
as China shut down many of its export factories. This led to increases in the price of the remaining
stock of imported supplies already in import-dependent country, which also triggered inflationary
pressures on the price of basic commodities despite the general low demand for imports due to the
coronavirus pandemic. It was difficult to find alternative imports after China’s shut-down because
many countries had partially or fully closed their borders which stifled international trade at the
time.

10
3.6. Spillover to the financial sector: Banks and Fintech
In 2020, the macroeconomic slowdown led to a rise in nonperforming loans in the banking sector
by 250 basis points. Private sector banks had the highest exposure to credit risk during the
outbreak.
14
Nonperforming loans arose from loans issued to small and medium scale enterprises
(SMEs), airlines, hotels, tour operators, restaurants, retail, construction and real estate businesses.
During the pandemic, there was a general decline in the volume of bank transactions, a decline in
card payments and a fall in the use of ATM cash machines worldwide. This led to fewer fees
collected by banks which negatively affected banks’ profit. Fintech businesses were also affected.
Some Fintech businesses witnessed very low patronage by consumers leading to loss of revenue
and profits, which negatively affected the equity investment of venture capitalists that funded
existing and new Fintech firms. This made many venture capitalists begin to hoard new equity
which led to the drying up of financing for some Fintech businesses. On the other hand, the
lockdowns due to the coronavirus outbreak resulted in higher demand for some sorts of online
services such as online shopping.
3.7. Spillover to financial markets
During the 2020 coronavirus outbreak, the most visible outcome of the COVID-19 crisis on
financial markets was the effect on the global stock market. Global stock markets lost $6 trillion
in value over six days from 23 to 28 February in 2020, according to S&P Dow Jones Indices.
Between February 20 and March 19, the S&P 500 index fell by 28% (from 3,373 to 2,409), the
FTSE 250 index fell by 41.3% (from 21,866 to 12,830), and the Nikkei fell by 29% (from 23,479
to 16,552). In the same period, large international banks witnessed a plunge in their share price,
for example, Citigroup’s share price fell by 49% (from US$78.22 to US$39.64), JP Morgan
Chase’s share price fell by 38% (from US$137.49 to US$85.30), and Barclays’ share price fell by
52% (from £181.32 to £86.45). Although the oil price war, in which Russia and Saudi Arabia were
driving down oil price by increasing oil production, played a role in the fall in stock markets
indices, the subsequent fall in stock market indices in March was mainly due to investors’ flight
to safety during the coronavirus pandemic.
14
https://www.ft.com/content/153f2922-6e15-11ea-89df-41bea055720b

11
3.8. Spillover to the event industry
Prior to 2020, the event sector contributed significantly to the economy. In 2018, for instance,
business events hosted more than 1.5 billion participants across more than 180 countries (Oxford
Economics)
15
. The events industry generated more than $1.07 trillion of direct spending,
representing spending to plan business events, produce business events, business events-related
travel, and direct spending by exhibitors. The industry also created 10.3 million direct jobs globally
and generated $621.4 billion of direct GDP.
16
During the 2020 coronavirus outbreak, the events industry was hit financially by a large number
of cancellations — exhibitions, live music shows, conference, weddings, parties, corporate events,
brand launches, trade shows, and more. Several big events were cancelled, for instance, the E3 and
SXSW tech events were cancelled which led to direct losses beyond $1 billion. Informa delayed
or cancelled events worth £400m over coronavirus pandemic. The 2020 Met Gala was postponed
indefinitely. In the US, many big event management companies that were hit financially by the
coronavirus outbreak appealed for federal aid from the U.S. government. The event ticketing
segment of the industry was also affected. One of the biggest global ticketing and events
company ‘Eventbrite’ announced that the COVID-19 outbreak materially affected its business
outlook for 2020. The effect of the increasing cancellation on Eventbrite was so bad that the company
had to withdraw its previously published ‘positive outlook’ for the first quarter of 2020. The effect
of the outbreak on global live events was worsened by the social distancing policy imposed by
several governments.
3.9. Spillover to the entertainment industry
The pandemic affected movie production, theatres and other entertainment activities. The global
film industry incurred a $5 billion loss during the 2020 coronavirus outbreak. Several Hollywood
movie productions were postponed indefinitely which meant goodbye to theatre and cinema. The
International Alliance of Theatrical Stage Employees (IATSE) reported that an estimated 120,000
below-the-line entertainment industry jobs were lost due to the coronavirus pandemic, most of
which were theatrical stage employees. The pandemic shutdown resulted in the loss of 120,000
15
https://insights.eventscouncil.org/Portals/0/OE-
EIC%20Global%20Meetings%20Significance%20%28FINAL%29%202018-11-09-2018.pdf
16
https://eventscouncil.org/coronavirus

12
jobs held by its 150,000 members, and the IATSE advocated that the entertainment industry should
be included in the planned federal stimulus (or bailout) package. In Italy, the COVID-19 outbreak
severely affected the entertainment industry which incurred losses estimated to run into the
millions of euros per week: from February 23 to March 1, 2020. There were estimated losses of
7.3million euros in the film screening sector, 7.2million euros in the theater segment, 4.1million
euros in the live music segment, 2.5 million euros in the dance activities segment and 1.8 million
euros in the exhibition segment.
17
In the UK
18
, an estimated 50,000 industry freelancers were
expected to lose their jobs as a result of the COVID-19 pandemic according to BECTU
(Broadcasting, Entertainment, Communications and Theatre Union). Collectively, unemployment
levels in the entertainment industry rose to unprecedented highs, and yet there were doubts as to
whether the entertainment industry would receive part of the planned federal stimulus package as
many lawmakers argued that the entertainment industry was not a main driver of the economy,
and some argued that the entertainment industry does not contribute much to economic activities
compared to the financial and manufacturing sectors.
Although the entertainment activities revived in 2021 and 2022, the performance of the
entertainment industry did not reach its pre-COVID level due to slow economic recovery. Box
office data
19
shows that the number of tickets sold were 221,762,724 and 498,162,785 tickets in
2020 and 2021 respectively compared to 1,314,169,169 and 1,225,910,803 tickets in 2018 and
2019 respectively. This showed that the number of movie theaters goers reduced by approximately
83% during the COVID period compared to the pre-COVID period. Also, total box office revenue
was $2,033,566,047 and $4,568,154,099 in 2020 and 2021 respectively compared to
$11,972,083,658 and $11,229,345,558 in 2018 and 2019 respectively. This showed that the
revenue generated from film declined by approximately 83.1% during the COVID period
compared to the pre-COVID period.
3.10. Spillover to the health sector
17
https://www.statista.com/statistics/1103010/impact-of-coronavirus-covid-19-on-the-entertainment-industry-in-
italy/
18
https://www.theguardian.com/film/2020/mar/19/loss-of-jobs-income-film-industry-hollywood-coronavirus-
pandemic-covid-19
19
https://www.the-numbers.com/market/

13
The impact of COVID-19 on the health sector was severe in 2020 compared to 2021 and 2022. In
2020, many countries witnessed high demand for public health services. Public hospitals were
overwhelmed with high demand for healthcare but the majority of the testing equipment were in
private hospitals. China temporarily closed all hospitals in the central city of Wuhan, the epicenter
of a coronavirus outbreak. Iran's hospitals struggled to cope with the coronavirus outbreak. In
Spain, the Spanish government nationalized all private hospitals and healthcare providers as the
virus was spreading very rapidly. Singapore had sufficient healthcare facilities and workers to cope
with the growing number of COVID-19 patients,
20
and private hospitals were inviting and
accepting foreign COVID-19 patients. The Ministry of Health (MOH) in Singapore subsequently
advised all doctors in public and private hospitals, and private specialist clinics, to immediately
stop accepting new foreign patients who do not live in Singapore.
The coronavirus outbreak also affected the pharmaceutical supply chain. Drug makers around the
world relied heavily on ingredients made in Chinese factories. About 60% of the world’s active
pharmaceutical ingredients (API) were made in China before the coronavirus outbreak, and the
coronavirus outbreak caused severe supply problems as China shutdown majority of its factories
including factories that produce drugs. Many pharmaceutical companies did not store up
substantial amounts of APIs prior to the coronavirus outbreak, and as a result, some essential drugs
were in short supply. The pharmaceutical companies that had stored up a substantial amount of
APIs in their warehouse refused to sell them for fear of running out of supplies while others were
willing to sell only at a very high price. The overreliance on Chinese API manufacturers posed the
biggest risk to the global pharmaceutical industry and the COVID-19 outbreak amplified the risk
even further.
Health insurers were also affected during the 2020 coronavirus outbreak. Many health insurers in
the US could not cope with the insurance payments to hospitals and the insurers sought to be
included in the planned federal relief stimulus package as the health sector’s economic outlook
was negative. The S&P 500 Managed Health Care index fell to 7% in February indicating that
investors felt the health care sector would be severely hit. Moody's rating agency downgraded the
nonprofit and public healthcare sector's outlook from stable to negative because of the continued
spread of the coronavirus disease (COVID-19). Moody’s reported that the health sector was likely
20
https://www.straitstimes.com/singapore/spore-has-sufficient-healthcare-facilities

14
to see fewer cash flow in 2020 compared to 2019 and falling revenue due to the cancellation of
elective surgeries. The ratings agency also stated that even if the coronavirus outbreak could be
contained, nonprofit healthcare companies were already facing rising expenses and widespread
uncertainty. Also, investment bankers that invested heavily in health care pressured health care
companies and medical supply firms to consider ways through which they can profit from the
crisis by increasing prices. The effect of the outbreak on the health sector was the increase in the
number of deaths due to the short supply of drugs, lack of vaccine to cure the patients,
insufficient number of hospital beds and insufficient isolation centers to cater for the rising
number of COVID-19 cases.
In mid-2021, COVID vaccines were developed by major pharmaceutical companies and ready
to be distributed to many countries after approval by the World Health Organisation. Rich
countries purchased about 78% of the total vaccines available in the world at the time, leaving
only 22% for poorer countries. This led to COVID-19 vaccine inequality as richer countries were
at an advantage than poorer countries. Although some rich countries agreed to donated some
vaccines to poorer countries, it did not help to reduce to the COVID-19 vaccine inequality
between rich and poor countries. Some of the vaccines that were distributed to poor countries
and to developing countries were nearing their expiry date at the time the vaccines reached those
countries.
3.11. Spillover to the education sector
The impact of the pandemic on the education sector was remarkable in several ways. The
coronavirus disrupted the $600 billion higher education industry.
21
At the early stages of the
pandemic in 2020, educators and students around the world felt the ripple effect of the coronavirus
as colleges and universities were instructed to shut down after the coronavirus was declared a
public health emergency in many countries. There were school closures of some kind in 44
countries on four continents, including Africa, with hundreds of millions of students around the
world facing disruptions. The outbreak had a more severe consequence on schools that did not
have an online learning platform. Moody’s, a credit rating agency, downgraded the U.S. higher
education outlook from ‘stable’ to ‘negative’, because 30% of the colleges and universities in the
21
https://www.bloomberg.com/news/articles/2020-03-19/colleges-are-going-online-because-of-the-coronavirus

15
US already had a weak operating performance, and it was difficult for these colleges and
universities to adapt with the financial and academic changes required to cope with the coronavirus
outbreak. Also, UNESCO reported that the COVID-19 outbreak disrupted the education of at least
290.5 million students worldwide.
22
Public schools in the US were closed, Australia shut down
some schools, while countries like Israel, Nigeria, Egypt, Italy, France, and Spain shut down all
schools, and this created some form of unemployment for teachers. Northern Ireland’s government
suspended all examinations in its colleges and universities. Multiple U.S. based universities that
ran a study abroad program overseas instructed students to return home from Italy, France and
Spain as the coronavirus outbreak became severe in those countries. On the positive side, there
were suggestions that the coronavirus outbreak increased the importance of online education and
distance learning, but the reality was that only a small percentage of the world’s education is taught
online. For instance, in the US alone, about 2.4 million undergraduates which is equivalent to 15%
of the total undergraduate students in the US studied entirely online in the fall of 2019, according
to Eduventures.
23
This showed that, even before the outbreak, the use of online education was
already low, and it was unlikely that the outbreak would lead to a radical shift from classroom
education to online education.
24
Only few schools had the capacity to arrange a distance learning
program for their students. Finally, countries like Canada, UK and US combined lost billions in
education revenue as foreign students either quit their studies or had to return home, while other
foreign students looked elsewhere for quick education when the travel restrictions prevented them
from studying in Canada, UK and US during the outbreak.
Data obtained from UNESCO
25
revealed that by the end of 2021, the global impact of the COVID
pandemic was significant. The COVID pandemic affected over 10.5million learners in the world,
which represented 0.7% of total enrolled learners, and there were only one country-wide learning
closures by the end of 2021. In the first quarter of 2022, the total number of affected learners rose
to 43.5million, which represented 2.8% of total enrolled learners, and there were 6 country-wide
22
https://en.unesco.org/themes/education-emergencies/coronavirus-school-closures
23
https://encoura.org/products-services/eduventures-research-and-advisory-services/
24
The fact that numbers were low does not mean that a shift to high levels is not possible following a COVID-
inspired shock. Of course, it might revert to the previous situation after campuses are reopened. But it’s also possible
that lecturers and students will have gained a taste of online learning, and for some it will have been found to be
effective.
25
https://en.unesco.org/covid19/educationresponse#schoolclosures

16
closures. This numbers show that the impact of COVID on global learning was significant and
increased from 2020 to 2022.
4. Fast Policy Response to COVID in 2020
4.1. General policy response
The policy measures introduced by policy makers around the world to cope with the coronavirus-
induced global recession can be divided into four categories: (i) monetary measures, (ii) fiscal
measures, (iii) public health measures, and (iv) human control measures.
Table 3: Some fast policy response during the 2020 COVID pandemic
Type
Fast policy response adopted by policy makers
Countries
1
Monetary policy
measures
(i) Granting regulatory forbearance to banks,
(ii) granting principal or interest moratorium to debtors
affected by COVID-19
Ireland, China, Nigeria and Italy
Central bank provision of liquidity to financial (bond and
equity) markets
China and US
Central bank purchase of bonds and securities that were
plunging in value rapidly
Australia, EU and Canada
Lowering interest rate by Central banks
Turkey, US, New Zealand, Japan and UK,
Nigeria, South Korea and Canada
Sustained flow of credit to banks, SMSEs, public health
sector, individuals and essential businesses
Australia, Nigeria, US and UK
2
Fiscal measures
Government approving a large federal stimulus package for
sectors and industries most affected by the COVID-19
pandemic
UK, US, Australia and Nigeria
Provision of income support for individuals
Australia, US, UK and India
Social welfare payments to support each household
Australia, US
3
Public health
measure
Public quarantine
India, US, UK and almost every country
Border quarantine
Poland, Vietnam, India, UK, US, Pakistan,
Australia and Colombia
Issuing a stay-at-home policy
Italy, Iran, Nigeria and UK
Social distancing policy
South Africa, US, UK, UAE, Singapore,
Nigeria, Japan, China, India, Germany,
Pakistan, Australia, South Korea and Israel
4
Human control
measures
Temporary release of prisoners from overcrowded prisons
Iran and US
Shut-down of air, land and sea borders
Taiwan, India, Mexico, US., Germany,
Serbia and Nigeria
Shutdown of schools
UK, Spain, Italy, South Africa, Nigeria
and US
Using the military to enforce a coronavirus stay-at-home
lockdown
Malaysia, Italy, US, Israel, South Africa
and Spain
Travel ban
EU, US, Argentina, Austria, Australia,
Bolivia, Cambodia, Canada, China, Cape
Verde, Cambodia, Colombia, Croatia,
Denmark, Egypt, Germany, Greece and
Haiti

17
Visa denial and suspension
South Africa, Canada, Singapore, China,
Nigeria, Ghana, Kenya, Bolivia and Brazil
4.2. Policy response to COVID pandemic by developing CEEMEA countries in 2020
Some policy response (and measures) taken by Central and Eastern Europe, Middle East and Africa
(CEEMEA) countries as of March 24 in 2020 are shown in table 4.
Table 4: Policy Measures to Combat Spread of Coronavirus in Central and Eastern Europe, Middle East and African
Countries in 2020
Foreign
travel
restrictions
Internal
travel
restrictions
State of
emergency
declared
Limiting
mass
gathering
Closing
down of
schools
Restricting
shops &
restaurants
Remarks
Czech





(i) Closure of shops and restaurants to
reopen on March 25
Hungary




(i) State of emergency declared,
indefinitely.
Poland





(i) Shops have limited working hours,
(ii) restaurants and entertainment
venues closed until March 28
Romania





(i) Decision announced days after the
new government was voted in on
March 16
Russia



(i) Restricted flights from and to high
risk areas, (ii) schools closed for 3
weeks
Ukraine





(i) All air travel suspended, (ii) shop
and/or local transport closure varies
by region or city
Egypt



(i) Partial suspension of mass
gatherings - does not ban religious
gatherings, but places some
limitations on the number of people
in mass gatherings
Israel





(i) Emergency measures to be
enforced by the police, (ii) 80% of
employees to stay at home.
Lebanon





-
Saudi
Arabia





-
Turkey





(i) Curfew imposed on citizens 65
years old or older, (ii) around 10,000
people arriving from abroad under
quarantine
Ghana



Kenya




18
Nigeria



(i) Closed all kinds of school, (ii)
partial shutdown of offices.
South
Africa




(i) State of national disaster declared,
(ii) 21-day lockdown announced on
March 23
India





Announced a 21-day nationwide
lockdown
Source: Goldman Sachs Global Investment Research (exhibit 4)
4.3. Fiscal policy measures during the COVID pandemic in 2020
Fiscal policy measures were also announced in many countries to mitigate the negative economic
impact of COVID-19, as shown in table 5.
Table 5: Fiscal Policy Measures to Combat Spread of Coronavirus in 2020
Countries
Total Increase in
Direct Spending
% of GDP
Fiscal Support via
Loans and Loan
Guarantees
% of GDP
Remarks
US
USD $484bn
2.4
USD2.3tn
9.3
Measures
announced
UK
GBP 350bn
11.8
GBP330bn
10.7
Measures
announced
Canada
C$ 107bn
6.2
-
-
Measures
announced
Czech
CZK 100bn
1.8
CZK900bn
15.9
Measures
announced
Poland
ZL 212bn
9
ZL700mn
0.1
-
Romania
RON 9bn
0.9
EUR 400mn
0.2
-
Russia
RUB 1.4tn
0.3
-
-
Measures
announced
Egypt
EGP 50bn
0.8
EGP50bn
0.8
-
Israel
ILS 2.8bn
0.4
-
-
Saudi
Arabia
SR 120 billion
3.9
-
-
-
Turkey
100 billion LIRA
185
-
-
Increased credit,
lower taxes and
deferred
payments
Nigeria
NGN3.5tn
2.3
$6.9bn
7.5
Measured
announced
India
₹1.7 lakh crore
967
$1 billion
0.04
World bank
loan
Source: Media reports and Central Banks’ press release
4.4. Monetary policy measures to the COVID pandemic in 2020

19
Some expansionary monetary measures were adopted by many central banks to stimulate the
economy through interest rate adjustments, as shown in table 6 and 7.
Table 6: Monetary Policy Measures Announced to Mitigate the Negative Economic Impact of COVID-19 in 2020 in Central &
Eastern Europe, Middle East and African countries
Countries
Monetary policy rate
New asset
purchases
Credit and
liquidity
facilities
Additional
As of
January 1
Current
rate
End of 2nd
Quarter
Czech
2.00
1.75
1.00
Government
bonds
Increased FX
swap stock
-
Hungary
0.90
0.90
0.90
-
-
Grace period for loans extended to firms
under FGS scheme
Poland
1.50
1.00
0.50
Government
bonds
-
Decreased reserve requirement and
increased interest rate
Romania
2.50
2.00
1.50
Government
bonds
-
-
Russia
6.25
6.00
6.00
FX sales
-
-
Ukraine
13.50
10.00
8.50
FX Sales
-
-
Egypt
12.25
9.25
9.25
-
-
Measures discussed to reduce loan burden
on firms and households
Israel
0.25
0.25
0.10
Government
bonds
-
Saudi Arabia
2.25
1.00
-
-
-
-
Turkey
12.00
9.75
-
-
-
Wide range of measures such as new credit
facilities, reduced reserve requirements,
etc.
Ghana
16.00
14.50
14.50
-
-
Reduced primary reserve requirement and
other ratios to release liquidity
Kenya
8.50
7.25
-
-
-
Reduced cash reserve ratio, extensive loan
restructuring
Nigeria
13.50
13.50
-
-
-
Measures towards moving away from
multiple FX regimes, reduced intervention
rate, reducing federal interest rate.
India
5.15
4.4
-
3.74 lakh
crore liquidity
injected
Reduced CRR to 3%. Three-month
moratorium on term loans outstanding.
Total liquidity injection 3.4% of GDP
South Africa
6.50
5.25
4.75
-
-
-
Source: Goldman Sachs Global Investment Research (exhibit 6). GS refers to Goldman Sachs.

20
Money supply measures were also adopted by many central banks through bond purchases
programs or as direct coronavirus relief funds. Table 7 below shows the total central bank spending
by some central banks to stimulate the economy.
Table 7: Central bank spending in 2020
S/N
Central Bank
Amount
Covid-19 Policy response
1
Reserve bank of India
$50 billion
India adopted a ‘whatever it takes’ policy
which suggest an uncapped amount of
spending
2
Central bank of Russia
300-billion ruble ($4 billion)
Anti-coronavirus crisis fund
3
Bank of Canada
C$1.0 billion (US$703
million)
Purchase of government bonds, beginning
with purchase of C$5 billion per week
4
ECB
€750bn (£637bn)
($796.2billion)
Emergency fund for bond purchase program
for EU member countries
5
Bank of England
£ 200 billion pounds ($248
billion)
Multiple rounds of quantitative easing.
6
Federal reserve
more than $3 trillion
Asset purchase exceeding US$3 trillion
7
People Bank of China
500billion yuan ($79 billion)
To rescue a virus-weakened economy
8
Reserve Bank of
South Africa
-
Fiscal authorities take responsibility for
economic recovery from COVID, not the
central bank
9
Bank of France
45 billion euros
($48.9billion)
Country allocation from the ECB rescue fund
10
Central bank of Italy
25 billion euros
($27.2billion)
Country allocation from the ECB rescue fund
11
Reserve bank of
Australia
A$90 billion ($56 billion)
Coronavirus support fund
12
Central bank of Brazil
1.2 trillion real ($231 billion)
Financial support was provided to counter the
effects of COVID-19
Total
$4.541 trillion

21
5. Fast policy response: Issues
5.1. A difficult decision
Policy makers in government, including central banks were faced with two major decisions, which
is to: ‘save the people before saving the economy’, or ‘save the economy before saving the people’.
One choice had to be made because it was difficult to achieve both at the same time. You cannot
save the people and the economy at the same time, because to save the people (who are also
economic agents) during the COVID outbreak you have to tell them to stay at home in order to
control the spread of coronavirus which means economic activities will have to stop or reduce
significantly, which will trigger an economic slowdown or recession. Policy makers in many
countries felt it was better to save the people before saving the economy, and as a result, many
countries plunged into a recession.
5.2. Contradictory or conflicting policy response
During the 2020 coronavirus pandemic, many of the fast policy responses were insufficient even
though the policies were formulated with good intentions. Monetary policy, for instance, helped
to calm financial markets but it did not stop the recession. Central banks responded to the
coronavirus outbreak by changing monetary policy variables such as lowering interest rates and
increasing money (or credit) supply to crucial sectors of the economy. But monetary policy alone
could not induce demand when there was a general flight to safety among consumers and investors
– not many people were buying anything or making new investments. It became clear to many
economists that monetary policy is not a vaccine, it cannot cure a recession. The expansionary
monetary policies adopted in many countries during the outbreak encouraged economic activities
but economic agents were unable to engage in economic activities because governments had
imposed social distancing restrictions amid fear of contacting the coronavirus during the outbreak.
The central bankers were ‘expecting’ particular outcomes and wanted to shift the needle in that
direction as much as they could, but in reality their best efforts wouldn’t achieve all that much.
5.3. Using broad fiscal expenditure and sector priority
Some countries used a federal fiscal stimulus (or bail-out) package to mitigate the effect of
COVID-19 on the economy during the outbreak. Choosing which sectors will receive part of the
stimulus package and which sectors will not receive the stimulus package became a political issue

22
in some countries like the UK and US as it stirred up debates as to whether the government
considered the entertainment sector, hospitality sector and the circular economy to be less
important and insignificant to the economy and ineligible to receive some funding from the federal
stimulus package compared to the banking sector, the manufacturing, education, pharmaceutical
and the aviation sectors which were considered to be significant contributors to the economy. Some
members of excluded sectors protested because they felt that the government did not consider their
industry as significant contributors to the economy.
5.4. Fast policy destroyed some segment of the hospitality industry very fast
Policies such as the ‘stay-at-home policy’ and the ‘social distancing policy’ severely damaged the
income of restaurants, pub, shops and hotels in many locations, in some cases, led to the shutdown
of these businesses. The policies negatively affected many businesses in the hospitality industry
in ways that were not anticipated, and the government failed to take responsibility for the failure
of small and large businesses that did not survive the coronavirus outbreak due to the government-
imposed social distancing and lockdown restrictions. It was either the social distancing policy was
implemented too early, or the policy was taken to the extreme by citizens and travelers who were
afraid to patronize such businesses for fear of contracting the COVID-19 disease.
26
6. Empirical analysis: impact of social distancing policies
6.1. Effect of social distancing on economic activities
In this section, we conducted multiple analyses. In the first analysis, we examine whether social
distancing policies affected economic activities. We collected one-month data from the 23rd of
March to 23rd April, 2020. We focused on this narrow sample period as it allows us to capture the
direct and immediate impact of social distancing policies on stock market performance and the
level of general economic/business activities at the peak of the coronavirus crisis in March and
April of 2020. We then collect data from stock markets in four continents: North America, Africa,
Asia and Europe. We extract stock market information on the closing price, (CP), lowest price
26
It’s clear that extreme isolation policies can be very effective against the coronavirus and can give governments
time to put in place tracking methods which can be effective if the number of COVID cases is small. It can also be
the case that governments acted very quickly even when it seemed too early damning the economic consequences of
such policies.

23
(LP) and highest price (HP) from the leading stock market indicators in the four continents: the
FTSE 500 index (UK), SP 500 (US), the Nikkei 225 (Japan) and the SA Top 40 index (South
Africa). In the estimations, we take the natural logarithm of each price data to reduce the observed
skewness in the stock price data distribution. Also, we collected data on Purchasing Managers'
Index (PMI) for Japan, UK, US and South Africa for the month of March and April. The PMI is
an index of the prevailing direction of economic trends in the manufacturing and service sectors.
It is derived from monthly surveys of private sector companies. The PMI is used as a proxy for the
level of general economic/business activities (EC). For the explanatory variables, we use three
variables to capture social distancing policies: the number of lockdown days (SDL), restriction in
internal movement (RIM), and international travel restrictions (IR). We also control for monetary
policy decision (MP), size of fiscal policy spending (FP) and the number of COVID-19 confirmed
cases (CC) reported in the four countries. We take the natural logarithm of the FP and CC variable
observations to reduce the observed skewness in the FC and CC data distribution. Data for the
RIM, IR, MP, FP and CC variables were collected from the ‘Oxford COVID-19 Government
Response Tracker (OxCGRT) database’. OxCGRT is a database that monitor governments’ policy
response during the outbreak.
27
The SDL variable was calibrated in the following way: the first
day of lockdown is assigned a value ‘1’, the second day of lockdown is assigned a value ‘2’, the
fifth day of lockdown is assigned a value ‘5’ and so on. Finally, the data gives us a panel data.
The model is a multivariate model, estimated using a least square regression, shown below.
𝐸𝐶𝑖, 𝑡 = 𝑐 + 𝑆𝐷𝐿𝑖, 𝑡 + 𝑅𝐼𝑀𝑖, 𝑡 + 𝐼𝑅𝑖, 𝑡 + 𝑀𝑃𝑖, 𝑡 + 𝐹𝑃𝑖, 𝑡 𝐶𝐶𝑖, 𝑡 + 𝑒𝑖, 𝑡 …… … …. 𝑒𝑞𝑛 1
𝑆𝑀𝑖, 𝑡 = 𝑐 + 𝑆𝐷𝐿𝑖, 𝑡 + 𝑅𝐼𝑀𝑖, 𝑡 + 𝐼𝑅𝑖, 𝑡 + 𝑀𝑃𝑖, 𝑡 + 𝐹𝑃𝑖, 𝑡 + 𝐶𝐶𝑖, 𝑡 + 𝑒𝑖, 𝑡 …… …… . 𝑒𝑞𝑛 2
Where,
EC = level of general economic activities
SM = the log vector of stock market variables: CP, ∆CP, LP and HP
i = country
t = business day of the week
27
https://www.bsg.ox.ac.uk/research/research-projects/coronavirus-government-response-tracker

24
The results are reported in table 8. The SDL coefficient is negative and significant in column 1, 2,
3, 4 and 5. This indicates that the number of lockdown days significantly affected the closing,
opening, lowest and highest stock prices and the level of general economic activities (EC). The
RIM coefficient is positive and significantly related to EC and the stock price variables. This
indicates that the imposed restriction on internal movement had a positive effect on the level of
economic activities and the closing, opening, lowest and highest stock price. The IR coefficient is
negatively related to EC and all the stock price variables in columns (1) to (5). This indicates that
the international travel restriction imposed during the coronavirus pandemic had a significant and
negative effect on the level of economic activities as well as stock prices. The MP coefficient is
negatively related to EC and the stock price variables in columns (1) to (5). This indicates that
monetary policy decisions had a significant and negative effect on the level of economic activities
and for the closing, opening, lowest and highest stock prices. The FP coefficient is positive and
significant in all estimations, and indicates that the size of fiscal policy spending had a positive
impact on stock prices and the level of economic activities. The CC coefficient is negative and
insignificant, which indicates that the number of confirmed cases did not have a significant effect
on the level of economic activities.
Table 8: Impact of social distancing policy on stock markets and general business activities
(1)
(2)
(3)
(4)
(5)
Closing Price
(CP)
Opening price
(OP)
Lowest Price
(LP)
Highest
Price (HP)
EC
SDL
-0.113***
(-4.87)
-0.112***
(-4.85)
-0.112***
(-4.87)
-0.112***
(-4.91)
-0.588***
(-3.20)
RIM
1.369*
(1.90)
1.388*
(1.95)
1.325*
(1.86)
1.430**
(2.02)
30.356***
(5.36)
IR
-0.580***
(-4.99)
-0.579***
(-5.05)
-0.587***
(-5.10)
-0.571***
(-4.99)
2.706***
(2.95)
MP
-1.107***
(-6.10)
-1.113***
(-6.22)
-1.096***
(-6.12)
-1.125***
(-6.32)
-11.517***
(-8.07)
FP
0.0003***
(40.67)
0.0003***
(41.2)
0.0003***
(41.07)
0.0003***
(41.44)
0.001***
(21.68)
CC
0.685***
(4.37)
0.680***
(4.39)
0.691***
(4.45)
0.674***
(4.37)
-1.467
(-1.19)
R2
83.47
83.87
83.96
83.84
61.47
Adjusted R2
82.29
82.72
82.71
82.68
58.71
Observation
76
76
76
76
76

25
SDL = number of lockdown days. RIM = restriction on internal movement. IR = international
travel restrictions. MP = monetary policy rates. FP = natural logarithm of fiscal policy spending.
CC = natural logarithm of the number of confirmed cases. EC = level of general
business/economic activities. CP = natural logarithm of closing stock price for each stock index.
LP = natural logarithm of lowest stock price for each stock index. HP = natural logarithm of
highest stock price for each stock index. OP = natural logarithm of opening stock price for each
stock index. ***, **, * represent statistical significance at the 1%, 5% and 10% level. T-
statistic are reported in parenthesis
6.2. Effect of COVID cases and deaths on global macroeconomic variables
Next, we analyzed the effect of rising COVID cases and COVID deaths on some macroeconomic
indicators. We collected data for ‘global energy commodity price index’, ‘world GDP growth’,
‘global inflation rate’ and ‘global unemployment rate’ from the world bank database. Data for
COVID confirmed cases and COVID deaths were collected from the World Health Organisation
(WHO) database.
The data was collected for the year 2020 to 2021 and the data is annual in its trend. The data was
estimated used ordinary least square regression. The results are reported in table 9 and 10 below.
The result in table x shows that the COVID cases are positively related to the global inflation rate,
global unemployment rate, and global energy commodity index. The result implies that the rising
number of COVID cases led to a significant rise in global energy commodity price, a rise in global
inflation and a rise in global unemployment rate.
Similarly, the result in table y shows that the COVID deaths are positively related to the global
inflation rate, global unemployment rate, and global energy commodity index. The result implies
that the rising number of COVID deaths led to a significant rise in global energy commodity price,
a rise in global inflation and a rise in global unemployment rate.

26
Table 9: Effect of COVID cases on global macroeconomic variables
Global energy
commodity price
index
World GDP
growth
Global inflation
rate
Global
unemployment
rate
Coefficient
(p-values)
Coefficient
(p-values)
Coefficient
(p-values)
Coefficient
(p-values)
Total confirmed
cases
3.289*
(0.082)
0.065
(0.28)
0.202*
(0.83)
0.350**
(0.02)
*, ** denotes significance at the 10% level and 5% level respectively
. .
Table 10: Effect of COVID deaths on global macroeconomic variables
Global energy
commodity price
index
World GDP
growth
Global inflation
rate
Global
unemployment
rate
Coefficient
(p-values)
Coefficient
(p-values)
Coefficient
(p-values)
Total deaths
4.161*
(0.083)
0.081
(0.83)
0.256*
(0.85)
0.443**
(0.02)
*, ** denotes significance at the 10% level and 5% level respectively
The implication of the findings reported in section 5.1 is that fiscal policy spending appears to be
more effective in mitigating the effect of the COVID-19 pandemic than monetary policy decisions
particularly because the adoption of accommodative monetary policies by many central banks can
exacerbate inflationary pressures that could worsen macroeconomic stability in the short term.
Meanwhile, the implication of the findings reported in section 5.2 is that the rising COVID
infections and death cases led to rising global inflation rate, rising unemployment rate and rising
energy prices

27
7. Conclusion
In this paper, we analyzed the coronavirus outbreak and the spillover to the global economy which
triggered the global recession in 2020. In the paper, we noted that policy makers in many countries
were under pressure to respond to the coronavirus outbreak. As a result, many governments made
fast policy decisions that had far-reaching positive and negative effects on their respective
economy. Social distancing policies and lockdown restrictions were imposed in many countries,
and there have been arguments that social distancing policies can trigger a recession.
In the paper, we empirically estimated the effect of social distancing on stock markets. We also
investigated the effect of COVID cases and deaths on macroeconomic performance. The results
(in section 5) showed that a 30-day social distancing policy or lockdown restriction negatively
affected the economy through a reduction in the level of general economic activities and through
its negative effect on stock prices. The result also showed that the rising COVID infection cases
and COVID deaths led to a rise in global inflation rate, unemployment rate and energy prices.
These results reflect that dilemma that countries faced during the crisis. Lawmakers in many
countries supported an extended social distancing policy, damning the consequences of social
distancing on the economy. The recession that followed, which many countries experienced, was
a reflection of the difficult choice that policy makers had to make in choosing whether to save the
economy before saving the people or to save the people before saving the economy; many
countries chose the latter. There were criticisms that the policies were too fast, premature or
insufficient, and that the policies contradicted one another in some areas, for instance, the
accommodative monetary policy encouraged economic agents to engage in economic activities
while the lockdowns and social-distancing (stay-at-home) policy prevented economic activities
from taking place.
Although the negative effects, as shown in the results, are noteworthy, there is also a need to not
waste this crisis because it creates an opportunity to introduce important reforms in the global
health sector. On the bright side, the coronavirus-induced public health crisis created an
opportunity for many governments to make lasting reforms in the public health sector. Some
countries, like the UK and Spain, repaired their public health care system during their crisis. Other
countries fixed the existing shortcomings in public infrastructure such as transportation systems,

28
the disease detection systems in public hospitals, and preparing for the transition to online
education. Some governments also used the crisis as an opportunity to fix the economic system
and the financial system.
Our study has some limitations. The main limitation of this research paper is the short period of
analysis due to limited dataset. The short dataset is because the COVID pandemic is ongoing at
the time of writing. A longer study period may capture the socioeconomic consequences of
government policies during the coronavirus crisis. Also, as future events unfold, there could be
spillovers to other sectors that we did not analyse in this study. Future studies on spillovers could
be extended to two directions. First, future studies can examine the impact on government policy
on the informal economy. Second, it would be important to explore how banks and financial
institutions react to economic policy developments during the coronavirus crisis.
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