WHAT INCREASES MORE SYSTEMIC RISK: PANIC OR STRINGENCY?

During the COVID-19 epidemic, systemic risk increased significantly due to financial instability and vulnerability in various sectors of the economy. When the coronavirus disease (COVID-19) was declared a pandemic, the panic level of individuals increased due to the severity of the disease, the novelty of the situation, the degree of uncertainty and unknowns, and the stringency of the measures taken by the authorities. Our work wants to cover the part of the literature that aims at the beginning of the event and the effect produced on the systemic risk the reaction of those involved – investors, financial institutions and national decision and regulatory bodies. This paper examines whether the systemic risk in the COVID-19 period was a consequence of the stringent measures taken by the authorities or whether it was the result of the panic reaction of market participants.

DOI: https://doi.org/10.47743/rebs-2024-2-0004