The Impact of pandemic and Economic Regularity on the GCC Financial Market

Abstract

This research investigates the Impact of COVID-19 on the GCC index, exchange, and oil return. It compares it with the outcomes of structural changes in the GCC economy: corporate tax and the Goods and Services Tax (VAT) implementation. Event study (constant return Model) and standard Vector Auto-regression show the Impact of COVID-19 on these three variables compared to that of corporate tax and the VAT. Using daily index return, oil price, and exchange. Saudi Arabia's data is from Oct 21, 1998, to Feb 10, 2022. United Arab Emirates data is from Aug 29, 2005, to Feb 10, 2022. Kuwait data from Dec 1, 2022. Qatar data is from Dec 31, 2001, to Feb 10, 2022. Oman data is from Dec 22, 2000, to Feb 10, 2022. Bahrain data is from Jun 1, 2014, to Feb 10, 2022. Corporate tax has a short-term impact on the index return of UAE and Oman, and it has a short-term effect on the oil return of UAE and Qatar. While in the long term, the impact affects the oil return of SA and UAE. VAT has a short-term impact on the index return of SA and Oman, and it has a short-term effect on the oil return of Bahrain. Although, in the long term, the impact is just affected the oil return of Bahrain.COVID-19 has a short-term impact on the index return of SA, and it has a short-term effect on the exchange return of SA, UAE, Kuwait, Qatar, and Oman. Although, COVID-19 has no long-term impact on GCC Variables. In addition, VAT and corporate tax have more Impact than COVID-19 on the long-term GCC oil return. Moreover, VAT, corporate tax, and COVID-19 have no impact on the long-term index return and exchange return. This study provides new insight into the financial market during external events which may have a direct or indirect effect. In addition, it gives a brief picture of the impact of new economic policies and pandemics on the GCC, the GCC index, exchange, and oil return by using Event Study (constant return Model) for short-term estimation and standard Vector Auto-regression for long term estimation.