Munich Personal RePEc Archive

Provocări pentru Finanţele Comportamentale în contextul COVID-19

Dumitriu, Ramona and Stefanescu, Răzvan (2020): Provocări pentru Finanţele Comportamentale în contextul COVID-19.

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Abstract

The recent coronavirus disease 2019 (COVID-19) generated some non-routine problems, characterized by a high degree of uncertainty which makes difficult the solving by the full rational decision making models. In the field of finance, such problems are those associated to the fiscal and monetary policies, that have to fight the recession or to investments in the presence of turbulences on the financial markets. Regarding the fiscal and monetary policies, governments and central banks could be tempted to use the same strategies that were successful in mitigating the effects of the Great Recession from 2007 – 2008, although the recent recession has different causes. In some developed countries there were launched stimulus packages, which allocated impressive financial resources to the economic branches affected by COVID-19. However, as in the case of Great Recession, the complexity of the circumstances made very hard an objective assignment of these resources. For the European Union, a particularity of the strategic solutions to the recent crisis is the fact that many of them are adopted by group decisions, where various interests of the participants have to be conciliated. In many countries, the fall of GDP, the rise of budget deficits and the present low interest rates could impose the choice between a high unemployment and an accelerating inflation. In such decisions, the objectives of governments, usually, very sensitive to the unemployment evolution, could compete with those of the central banks preoccupied by the prices stability. An accelerating inflation could shock the populations from many developed countries which, in the recent past, got used to a comfortable monetary stability. It could also undermine the central banks credibility, leading to distrust in the national currencies. In such situations, the inflation expectations would be no longer a tool for the monetary policies, but an obstacle for their objectives. They could also increase the uncertainty for some financial decisions, modifying the behaviors of various categories of investors, creditors of debtors. In the first quarter of 2020, the news about the COVID-19’s propagation and about the measures meant to help the economies provoked an unusual large number of negative and positive shocks on the developed and emerging capital markets. Such turbulences could be viewed as symptoms of overreactions which occur often in the times of crisis. It is possible, although not easy to prove, that the concern for their own health changed the behavior of some investors. The increased volatility could intimidate many risk-averse investors, but it could also attract some investors who use to take high risks. In some countries, the national currencies depreciated and the volatility of the exchange rates increased. As it happened before in other turbulent times, the gold became an attractive asset for investors. The potential boundaries of the rationality induced by COVID-19 in some decisions such as those regarding fiscal and monetary policies or investments are, somehow, new for the field of the finance. They could be viewed as challenges for the Behavioral Finance which studies the causes of irationality in the financial decision making. However, in the present days, when it is very hard to estimate for how long the COVID-19 pandemic will last, it is also very difficult to predict if such situation would lead to new approaches in the field of the Behavioral Finance.

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