Impact on the global economy in the later stage of the epidemic

Name: Jiahao Wang

Student number: 40263679

The impact of the epidemic on the world economy in the later stage of the epidemic and response strategies

The degree of economic damage caused by the epidemic (covid-19) depends on many factors. The most important factor is the speed at which the virus is contained, that is, how much financial support global governments are willing to deploy to take quick and effective actions. At present, the statement of the Governor of New York State of the United States reflects the biggest difference between the United States and China in responding to the epidemic. One is the central government's unified material and personnel policy control, and the other is that the states bid up prices for ventilators and were eventually intercepted by the United States. Therefore, the key to the impact of the epidemic on the global economy lies in the high implementation of epidemic prevention and control in various countries in the middle and late stages.

From the perspective of macroeconomic development, the social blockade caused by the coronavirus has curbed the speed of currency circulation. At the same time, the shutdown of major factories has also had a significant impact on the market material supply chain, and thus the economic development speed. In the later stage of the epidemic, countries adopted a series of economic and monetary measures in order to restore economic production. The money supply exceeded the demand, which led to the slow rise of market prices. For example, in order to hedge the risks of stocks and bonds, the United States introduced a series of rescue policies and issued a large number of currencies. As a result, the money in the US market has increased, but the country has no actual economic production behavior. At first, a large number of currencies will penetrate into the industries related to the coronavirus, and then slowly penetrate into various industries, and the US dollar is the dominant currency of the global economy, so rising prices will gradually penetrate the world.

As far as the impact on the financial market is concerned, first of all, the market has become highly turbulent due to the impact of the epidemic, and panic selling has led to the destruction of the stock market wealth of developed and emerging economies. In the former, evasion of security reduced government bond yields to record lows; in the latter, the exit boom was the lack of liquidity in the fixed-income market, leading to higher yields. Secondly, the financial market under the influence of the epidemic is experiencing serious currency devaluation pressure every day, so cash flow has become the current hard currency. Now that the epidemic has spread to the world, in the face of global foreign exchange and stocks, the exchange rate changes of different countries will depend on the degree of their impact; and there is no strong causal relationship between the long-term performance of the stock market and the epidemic. The long-term performance of the stock market It depends on the internal development logic of the economy, and the impact of periodic epidemics on the market is generally temporary. In the short-term, the performance of international stocks is as follows: the downward revision of brow bone rise expectations and the valuation differences in various markets will promote the rebalancing of the asset portfolio.

Looking at global economic development, the spread of the epidemic has increased the difficulty and uncertainty of world economic development. Therefore, the most important thing at the moment is for governments to invest money to curb the spread of the virus and take effective and rapid actions to recover the market economy.

reference

Luo (2nd July 2020) How the epidemic affects the global economy, employment and consumption, Available at: http://www.baijiahao.baidu.com (Accessed: 10th October 2020).

picture source: picture1  Bloomberg（EUR and GBP）

                           picture2 ShopperTrak , 29th, June 2020 BBC