The purpose of this article is to analyze the impact of COVID-19 pandemic on inflation and exchange rate volatility and to study the government measures implemented in order to support economies. Based on monthly data from January to September 2020 for 10 countries, the dynamic panel data model is used to study the effect of COVID-19 spread. The results reveal that high infections negatively affect exchange rate and inflation; the responses of governments increase inflation and result in a lower exchange rate. In fact, providing health protocols which entered the countries into a new economic and financial crisis since economic agents could not freely engage in economic activities. Therefore, policy makers in both regions should invest in health infrastructure to improve the capacity of the national health system to resist the epidemic of contagious diseases.
Keywords: COVID-19 pandemic; Dynamic panel data model; Government policy; Monetary policy; Public health.
© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022.
