COVID-19 and Capital Flows: He Responses of Investors to the Responses of Governments
26 Pages Posted: 3 Jun 2021
Date Written: 2021
Abstract
This paper examines the effect of national government response measures to Covid-19 on German international capital flows. Analyzing highly disaggregated monthly data from the German balance of payments statistics over the period from January 2019 through January 2021, we find that bilateral financial interactions are negatively affected by stricter containment and closure policies as well as health system policies of a partner country, while German capital flows benefit from a partner's economic support policies. Moreover, to the extent that public interventions to fight the pandemic affect financial interactions, the adjustment mainly takes place along the intensive margin.
JEL Classification: F36, F60, I18
Suggested Citation: Suggested Citation