Economic activity and financial markets: the case of air travel in COVID-19 pandemic

We investigate the co-movements of real economic activity with COVID-19 cases, crude oil and financial markets using the case of US airline industry. The pairwise relationships are examined through wavelet coherence method. Results show that air travel activity positively leads COVID-19 infections in the 4-8 days scales. But it has no consistent relationship with crude oil or financial markets. The findings connect the literature in the nexus of real economic activity, COVID-19 infections and financial markets. A policy implication is that, despite dampening real economic activities, restrictive policies to curb the pandemic may pose limited impact on financial markets if coupled with stimulus policies.