Market reactions to North American economic indicators: comparison of the financial crisis versus the COVID 19 crisis

Abstract

This paper presents a comparative analysis of the impact of economic crises on the development of financial markets, focusing on the United States and specifically on the 2008 global financial crisis and the COVID-19 pandemic. It is divided into four chapters that examine the nature, causes, consequences, and responses to such crises. The first chapter establishes a replicable methodology for analyzing the impact of crises at the micro- and macro-temporal levels, focusing on the subprime and COVID-19 crises. The second chapter examines the nature and causes of economic crises, highlighting the importance of identifying patterns and trends to prevent future crises. The need for supervision and regulation to address vulnerabilities in the financial system is emphasized. The third chapter defines relevant financial indicators and reviews previous studies to better understand the impact of crises on these indicators, providing guidance for investors, regulators, and policymakers. A comparative analysis of the subprime and COVID-19 financial and health crises in the United States reveals notable differences in their impact on financial indicators and the broader economy. The subprime crisis triggered a climate of financial panic, with high volatility and a marked decline in the valuation of financial indices, affecting both aggregate supply and demand. In contrast, the COVID-19 crisis generated turbulence in the markets, albeit to a lesser extent, focusing mainly on aggregate supply due to supply chain disruptions and production constraints. These results highlight the importance of understanding the specificities of each crisis in order to adopt effective public policies that promote financial and economic stability. In terms of policies, it recommends the implementation of flexible and adaptive strategies that address the specific needs of each crisis, including measures to promote economic growth and improve consumer confidence. It also emphasizes the need for stabilization policies that counteract adverse effects on aggregate supply and demand, maintain macroeconomic stability, and promote an environment conducive to long-term investment and development. These approaches can help mitigate the adverse effects of future crises by strengthening the economy's ability to withstand and recover from economic and financial shocks. Finally, the fourth chapter proposes a methodology for analyzing financial returns during crises, facilitating a quantitative assessment of the impact of specific market events. The paper concludes that economic crises, such as the 2008 and COVID-19 crises, pose significant challenges for firms and workers, exacerbate financial insecurity, and highlight the need for inclusive and equitable policies. It also underlines the importance of flexible and adaptive economic policies, as well as a detailed assessment of the impact of crises on financial markets, to promote long-term economic and financial stability. The findings of this analysis offer valuable insights for decision-making in both investment and economic policy. It is evident that the effective management of the risks associated with crises is of paramount importance in order to mitigate their adverse impacts and to facilitate the sustainable economic and social recovery that is so crucial for the future of any nation.