The nexus between COVID-19, temperature and exchange rate in Wuhan city: new findings from partial and multiple wavelet coherence

Abstract

This study attempts to document the nexus between weather, COVID-19 outbreak in Wuhan and the Chinese economy. We used daily average temperature (hourly data), daily new confirmed cases of COVID-19 in Wuhan, and RMB (Chinese currency) exchange rate to represent the weather, COVID-19 outbreak and the Chinese economy, respectively. The methodology of Wavelet Transform Coherence (WTC), Partial Wavelet Coherence (PWC) and Multiple Wavelet Coherence (MWC) is employed to analyze the daily data collected from 21st January 2020 to 31st March 2020. The results have revealed a significant coherence between the series at different time-frequency combinations. The overall results suggest the insignificance of an increase in temperature to contain or slow down the new COVID-19 infections. The RMB exchange rate and the COVID-19 showed an out phase coherence at specific time-frequency spots suggesting a negative but limited impact of the COVID-19 outbreak in Wuhan on the Chinese export economy. Our results are contrary to many earlier studies which suggest a significant role of temperature in slowing down the COVID-19 spread. These results can have important policy implications for the containment of COVID-19 spread and macro-economic management with respect to changes in the weather.