How to calm down the markets? The effects of COVID-19 economic policy responses on financial market uncertainty.

Financial markets during the COVID-19 pandemic are characterized by a prolonged period of increased uncertainty. In this paper, we analyse how the announcements of policy interventions and responses, to buffer short-term economic impact of the pandemic and offset financial turmoil, have affected the level of realized volatility in 23 countries. Under the augmented heterogeneous autoregressive model framework, we show that the international calming effect of COVID-19 economic policy actions originates from the US macroprudential policy announcements.