COVID-19 and Spillover Effect of Global Economic Crisis on the United States’ Financial Stability

Abstract

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Due to the novel coronavirus pandemic (COVID-19), the lockdown engendered has had a vicious impact on the global economy. This analysis’ prime intention is to evaluate the impact of the United States’ economic and health crisis as a result of COVID-19 on its financial stability. Additionally, the investigation analyzed the spillover impact of the worldwide economic slowdown experienced by COVID-19 on the United States’ financial volatility. The study applied an autoregressive distributed lag (ARDL) model and discovered that the economic and health crises that occurred in the United States portentously upset the future expectations of its investors. Conspicuously, the health crisis in Spain and Italy were ominous spillovers of the United States’ financial instability in the short-run. Likewise, an economic crisis ensued in the United Kingdom because of COVID-19 causing spillover for the United States markets’ financial instability. The examination evaluated that Asian and African nations’ economic crises perilously affects the United States’ financial stability. The study determined that financial instability occurred in the United States due to its own economic and health crises persisted for a longer period than financial disequilibrium that occurred in other nations. The analysis suggested some strategies of smart lockdown that the government of the United States and other nations should follow to restart the economic cycle through tighter controls to minimize losses by following the steps of (a) preparing a lockdown checklist, (b) monitoring completion of lockdown tasks, and (c) complete a close-down stock take or count.

Keywords

• COVID-19 and financial stability
• worldwide economic crisis
• fear gage
• economic sustainability
• ARDL model