Spillover of COVID-19: Impact on the Global Economy

27 Pages Posted: 30 Mar 2020 Last revised: 22 Aug 2021

See all articles by Peterson K Ozili

Peterson K Ozili


Thankom Arun

University of Essex - Essex Business School

Date Written: March 27, 2020


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. 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. In contrast, the imposed restriction on internal movement and higher fiscal policy spending had a positive impact on the level of economic activities, although the increasing number of confirmed coronavirus cases did not have a significant effect on the level of economic activities.

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.

JEL Classification: G21, G28, I11, I18

Suggested Citation

Ozili, Peterson K and Arun, Thankom, Spillover of COVID-19: Impact on the Global Economy (March 27, 2020). Available at SSRN: https://ssrn.com/abstract=3562570 or http://dx.doi.org/10.2139/ssrn.3562570

Peterson K Ozili (Contact Author)

Independent ( email )


Thankom Arun

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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