Debt to the Penny and US Dollar Index: a lead-lag relationship of the US economy under impacts of the Covid-19 outbreak
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 14 March 2023
Issue publication date: 7 February 2024
Abstract
Purpose
This study investigates the interactions between the US daily public debt and currency power under impacts of the Covid-19 crisis.
Design/methodology/approach
The authors employ the multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) modeling to explore the interactions between daily changes in the US Debt to the Penny and the US Dollar Index. The data sets are from April 01, 1993, to May 27, 2022, in which noticeable points include the Covid-19 outbreak (January 01, 2020) and the US vaccination campaign commencement (December 14, 2020).
Findings
The authors find that the daily change in public debt positively affects the USD index return, and the past performance of currency power significantly mitigates the Debt to the Penny. Due to the Covid-19 outbreak, the impact of public debt on currency power becomes negative. This effect remains unchanged after the pandemic. These findings indicate that policy-makers could feasibly obtain both the budget stability and currency power objectives in pursuit of either public debt sustainability or power of currency. However, such policies should be considered that public debt could be a negative influencer during crisis periods.
Originality/value
The authors propose a pioneering approach to explore the relationship between leading and lagging indicators of an economy as characterized by their daily data sets. In accordance, empirical findings of this study inspire future research in relation to public debt and its connections with several economic indicators.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2022-0581
Keywords
Acknowledgements
This study is supported by a research project namely “Khủng hoảng nợ công hậu Covid 19: Tiếp cận bằng hệ thống cảnh báo sớm EWS (Early Warning System)” coded B2022-KSA-08, which is performed by University of Economics Ho Chi Minh City (UEH).
Citation
Nguyen, B.K.Q., Phan, N.T.B. and Le, V. (2024), "Debt to the Penny and US Dollar Index: a lead-lag relationship of the US economy under impacts of the Covid-19 outbreak", International Journal of Social Economics, Vol. 51 No. 2, pp. 178-198. https://doi.org/10.1108/IJSE-08-2022-0581
Publisher
:Emerald Publishing Limited
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