Market Reactions to Government Support Packages During the Pandemic in North Macedonia

Abstract

Abstract The Covid-19 crisis put pressure on governments to design immediate support packages for alleviating the negative economic consequences for households and businesses. In this paper, we examine the stock market’s reactions to the announcements of each of the four support packages designed by the Macedonian government during the pandemic year. We find that the magnitude, the target, and the extent of realisation of the support package mattered how investors reacted to the government interventions. The market positively reacted only around the second package which was mainly designed to support firms’ liquidity. Once the market consumed the information about the poor realisation of the devised packages, investors remained restrained and uncertain for the upcoming support package. Our findings have important policy implications by showing the differential response to the different types of support packages.