Do major health shocks affect the interconnectedness of E-commerce and electronic payment markets? a regional analysis

In view of the recent pandemic and its associated impact, this study examines the relationship between e-commerce and mobile/electronic payment markets by utilizing two indices as proxies of these market developments. The study employed DCC-GARCH modeling, Hacker–Hatemi bootstrap causality test, Diebold–Yilmaz volatility spillover analysis and a volatility modeling incorporating COVID19 related death statistics of three regions: America, Europe and Asia. The results show that while the two markets display very high time-varying correlations across years, a significant causal relationship is only found during the pandemic. Causality runs from the mobile/electronic payment index to the e-commerce index. Volatility spillover analysis further supports this finding. Interestingly, the mobile/electronic payment index tends to become a net volatility transmitter in the pandemic period. When we incorporate regional COVID19 statistics on cases and deaths in the volatility modeling of the e-commerce index, we find that only COVID19 deaths in Europe have a significant effect on e-commerce returns. This result may be rationalized by the relative tightness of the e-commerce market in Europe compared to America and Asia. Likewise, demographic characteristics might be another potential driver for our findings.