Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no5.0265

COVID-19, Remittance Inflows, and the Stock Market: Empirical Evidence from Bangladesh  

QAMRUZZAMAN, Md. (School of Business and Economics, United International University)
KARIM, Salma (School of Business and Economics, United International University)
JAHAN, Ishrat (School of Business and Economics, United International University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.5, 2021 , pp. 265-275 More about this Journal
Abstract
This study's motivation is to investigate the association between the stock market, remittance, and the pandemic of COVID-19 for the period from March 3, 2020, to December 14, 2020. For evaluating the impact of COVID-19 and remittances on stock market behaviour during the pandemic, the study applies Autoregressive Distributed lagged (ARDL) for magnitudes estimation and directional association through the Toda-Yamamoto causality test. Study findings from ARDL estimation revealed that COVID-19 measured by detecting new cases negatively influences the stock market both in the long-term and short-term. Remittance positively influences the stock market behaviour, particularly in the long-term. Furthermore, the directional causality test disclosed unidirectional causal effects between COVID-19 and the stock market behaviour, which establishes all proxy measures for the equation's stock market. The hypothesis results explain the causal relationship between remittance inflows and the stock market in Bangladesh. The study's application will help policymakers rethink the policies for channelizing remittances for productive investment areas. Furthermore, the study's findings will reinstate the widely perceived notions, which is the critical role of remittance in the economy even though the economy passes through a great pandemic.
Keywords
COVID-19; Stock Market; Stock Market Remittances; ARDL; Toda-Yamamoto;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Demirguc-Kunt, A. R., & Peria, M. M. (2010). Do remittances promote financial development? Journal of Development Economics, 96, 255-264. https://doi.org/10.1016/j.jdeveco.2010.10.005   DOI
2 Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366a), 427-431. https://doi.org/10.1080/01621459.1979.10482531   DOI
3 Elsayed, A., & Elrhim, M. A. (2020). The effect Of COVID-19 spread on Egyptian stock market sectors. SSRN Journal. 1(2), 1-14. https://doi.org/10.2139/ssrn.3621166   DOI
4 Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied Statistics, 28(5), 573-583. https://doi.org/10.1080/02664760120047906   DOI
5 Giuliano, P., & Ruiz-Arranz, M. (2009). Remittances, financial development, and growth. Journal of Development Economics, 90(1), 144-152. https://doi.org/10.1016/j.jdeveco.2008.10.005   DOI
6 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   DOI
7 Haitham, E. B. (2020). Effect of COVID-19 on the Arab financial markets: Evidence from Egypt and KSA. IOSR Journal of Business and Management (IOSR-JBM), 22(6), 14-21. http://www.iosrjournals.org/iosr-jbm/papers/Vol22-issue6/Series-5/B2206051421.pdf
8 Aluko, O. A., & Kolapo, F. T. (2020). Macroeconomic factors and stock market development in sub-Saharan Africa: Does the measure of stock market development matter? Transnational Corporations Review, 12(1), 53-62. https://doi.org/10.1080/19186444.2019.1683433   DOI
9 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   DOI
10 Banerjee, A., Dolado, J., & Mestre, R. (1998). Error-correction mechanism tests for cointegration in a single-equation framework. Journal of Time Series Analysis, 19(3), 267-283. https://doi.org/10.1111/1467-9892.00091   DOI
11 Banerjee, A., Dolado, J. J., Galbraith, J. W., & Hendry, D. (1993). Co-integration, error correction, and the econometric analysis of non-stationary data. UK: Oxford University Press.
12 Chowdhury, M. B. (2011). Remittances flow and financial development in Bangladesh. Economic Modelling, 28(6), 2600-2608. https://doi.org/10.1016/j.econmod.2011.07.013   DOI
13 Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, 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   DOI
14 Aldasoro, I., Cabanilla, C., Disyatat, P., Ehlers, T., McGuire, P., & Von Peter, G. (2020). Central bank swap lines and cross-border bank flows (BIS Bulletin No 34). Bank for International Settlements. https://www.bis.org/publ/bisbull34.pdf
15 Ben Ayed, W., Medini, F., & Lamouchi, R. A. (2020). Stock market under the global pandemic of COVID-19: Evidence from Tunisia. SSRN Journal, 1(1), 45-89. https://doi.org/10.2139/ssrn.3598726   DOI
16 Bettin, G., Lucchetti, R., & Zazzaro, A. (2012). Financial development and remittances: Micro-econometric evidence. Economics Letters, 115(2), 184-186. https://doi.org/10.1016/j.econlet.2011.12.026   DOI
17 Brown, R. P., Carmignani, F., & Fayad, G. (2013). Migrants' remittances and financial development: Macro-and micro-level evidence of a perverse relationship. The World Economy, 36(5), 636-660. https:doi.org/10.1111/twec.12016   DOI
18 Coulibaly, D. (2015). Remittances and financial development in Sub-Saharan African countries: A system approach. Economic Modelling, 45, 249-258. https://doi.org/10.1016/j.econmod.2014.12.005   DOI
19 Robinson, J., & Kengatharan, N. (2020). Exploring the effect of Covid-19 on small and medium enterprises: Early evidence from Sri Lanka. Journal of Applied Economics & Business Research, 10(2), 115-124. https://pesquisa.bvsalud.org/globalliterature-on-novel-coronavirus-2019-ncov/resource/en/covidwho-665263   DOI
20 Raza, S. A., & Jawaid, S. T. (2014). Foreign capital inflows, economic growth, and stock market capitalization in Asian countries: An ARDL bound testing approach. Quality & Quantity, 48(1), 375-385. https://doi.org/ 10.1007/s11135-012-9774-4   DOI
21 Pinshi, C. (2020). COVID 19 Pass-through Arithmetic on the Congolese Financial Systems (MPRS Paper 101783). University Library of Munich, Germany. https://mpra.ub.unimuenchen.de/101783/
22 Acosta, P. A., Baerg, N. R., & Mandelman, F. S. (2009). Financial development, remittances, and real exchange rate appreciation. Economic Review, 94, 1-15. https://www.econstor.eu/bitstream/10419/57669/1/602140013.pdf
23 Ahmar, A. S., & Del Val, E. B. (2020). SutteARIMA: Short-term forecasting method, a case: Covid-19 and the stock market in Spain. Science of the Total Environment, 2(5), 138883. https://doi.org/10.1016/j.scitotenv.2020.138883   DOI
24 He, Q., Liu, J., Wang, S., & Yu, J. (2020). The impact of COVID-19 on stock markets. Economic and Political Studies, 6(9),1-14. https://doi.org/10.1080/20954816.2020.1757570   DOI
25 Issahaku, H., Abor, J. Y., & Harvey, S. K. (2017). Remittances, banks, and stock markets: Panel evidence from developing countries. Research in International Business and Finance, 42, 1413-1427. https://doi.org/10.1016/j.ribaf.2017.07.080   DOI
26 Paul, B. P. (2014). Testing export-led growth in Bangladesh: An ARDL bounds test approach. International Journal of Trade, Economics, and Finance, 5(1), 1-5. https://doi.org/10.7763/IJTEF.2014.V5.331   DOI
27 Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616   DOI
28 Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. https://doi.org/10.1093/biomet/75.2.335   DOI
29 Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250. https://doi.org/10.1016/0304-4076(94)01616-8   DOI
30 Ryandono, M. N. H., Muafi, M., & Guritno, A. (2021). Sharia stock reaction against COVID-19 pandemic: Evidence from Indonesian capital markets. The Journal of Asian Finance, Economics, and Business, 8(2), 697-710. https://doi.org/10.13106/jafeb.2021.vol8.no2.0697   DOI
31 Topcu, M., & Gulal, O. S. (2020). The impact of COVID-19 on emerging stock markets. Finance Research Letters, 36, 101691. https//doi.org/10.1016/j.frl.2020.101691   DOI
32 Uddin, G. S., & Sjo, B. (2013). Remittances, financial development, and economic growth in Bangladesh. South Asia Economic Journal, 14(2), 261-273. https://doi.org/10.1177/1391561413500174   DOI
33 World Bank. (2019). World development indicators. World Bank. http://data.worldbank.org/data-catalog/world-development-indicators
34 Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 16, 101528. https://doi.org/10.1016/j.frl.2020.101528   DOI
35 Liu, H., Wang, Y., He, D., & Wang, C. (2020). Short-term response of Chinese stock markets to the outbreak of COVID-19. Applied Economics, 52(53), 5859-5872. https://doi.org/10.1080/00036846.2020.177683   DOI
36 Jeris, S. S., & Nath, R. D. (2020). Covid-19, oil price and UK economic policy uncertainty: Evidence from the ARDL approach. Quantitative Finance and Economics, 4(3), 503. https://doi.org/10.3934/QFE.2020023   DOI
37 Karikari, N. K., Mensah, S., & Harvey, S. K. (2016). Do remittances promote financial development in Africa? SpringerPlus, 5(1), 1011. https://doi.org/10.1186/s40064-016-2658-7   DOI
38 Kwiatkowski, D., Phillips, P., Schmidt, P., & Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root? Journal of Econometrics, 54(1-3), 159-178. https://doi.org/10.1016/0304-4076(92)90104-Y   DOI
39 Narayan, P. K., & Smyth, R. (2005). The residential demand for electricity in Australia: An application of the bounds testing approach to cointegration. Energy Policy, 33(4), 457-464. https://doi.org/10.1016/j.enpol.2003.08.011   DOI
40 Noman, A. M. (2020). Remittances and banking sector development in South Asia. International Journal of Banking and Finance, 8(4), 47-66. http://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8444
41 Qamruzzaman, M., & Wei, J. (2018). Financial innovation, stock market development, and economic growth: An application of ARDL model. International Journal of Financial Studies, 6(3), 69. https://doi.org/10.3390/ijfs6030069   DOI
42 Puriwat, W., & Tripopsakul, S. (2021). Customer engagement with digital social responsibility in social media: A case study of COVID-19 situation in Thailand. The Journal of Asian Finance, Economics, and Business, 8(2), 475-483. https://doi.org/10.13106/jafeb.2021.vol8.no2.0475   DOI
43 Qamruzzaman, M., & Jianguo, W. (2018a). Investigation of the asymmetric relationship between financial innovation, banking sector development, and economic growth. Quantitative Finance and Economics, 2(4), 952-980. https://doi.org/10.3934/QFE.2018.4.952   DOI
44 Qamruzzaman, M., & Jianguo, W. (2018b). SME financing innovation and SME development in Bangladesh: An application of ARDL. Journal of Small Business & Entrepreneurship, 31(9), 1-25. https://doi.org/10.1080/08276331.2018.1468975   DOI