Measuring Early Impact of COVID-Pandemic Across Lower Middle Income Economies in South Asia Using Volatility Spillover Convergence Model with n-Phase Approach

No one in the World and in particular the Economist's community could have gathered an understanding about the manner in which this Pandemic have erupted or shaken the economies. Developing countries particularly South Asian Economies, and within them, the Lower middle Income (LMI) countries comprising India, Pakistan, Sri Lanka, Bangladesh, Bhutan and Nepal had also seen a similar turmoil. For this the Markov-switching (endogenous switching) VAR model using Exponential moving average volatility model (EWMA) of the four macroeconomic variables were used. The author tried to use the EWMA volatility model to witness the impact of spillovers and shock persistence. The model outcomes critically examined the pre-Covid and early-Covid phases regime-switching process (2 Regime, 2 phase study). It was observed that Nepal and Sri Lanka (particularly Nepal) were found to be having least bi-directional relationship in terms of spillover convergences and post-shock recovery. In terms of variables, SDR exchanges rates were having maximum unilateral and bilateral spillover convergences.