Exchange rate innovation, global pandemic and stock market returns: Empirical evidence from ECOWAS countries

This study used the panel VAR impulse response function model and high-frequency monthly data from 2020M1 to 2021M12 to examine the response of innovations in the exchange rate and stock market returns to the COVID-19 pandemic in Economic Communities of West African States (ECOWAS). The study found that the effect of shocks of COVID-19 today on future exchange rate innovation worsens the real conditions of exchange rate innovation in ECOWAS countries. Again, the impact of the shocks of COVID-19 today on future stock market returns encourages the real conditions of stock market returns in ECOWAS countries. It was recommended that instead of lockdown, ECOWAS governments should explore other policy options peculiar to the region in COVID-19 containment and also strive harder to deepen the stock market and encourage increased utilization of information and communication technology in stock market trading to cut costs, raise returns and connect trade with the rest of the world’s stock markets.