Even after the central banks launched a coordinated economic support package on Sunday, markets fell again hours later. One way to prevent the further collapse that is now being discussed is to temporarily close the financial markets, as Franklin D. Roosevelt did with US banks in 1933. However, despite the magnitude of the downturn, it is better to stay open.

Proponents of the closure argue that pricing – the main function of markets – has become almost impossible given the unpredictability of economic damage. Markets can no longer serve as a means of efficient allocation of capital, but simply superimpose a financial crisis on the health and economic ones.

Markets do not work dysfunctionally. Turbulent movements in securities prices may undermine economic confidence but are not in themselves a sign that markets are not working. Although pricing is difficult, it should be left to continue. It is no better for the economy to have no public prices at all. Closing the stock markets can create problems that it seeks to prevent, as investors are isolated but struggling to value assets. It is particularly important that small investors are not excluded from trading, given that large investors will continue to trade privately.

The current prices do not reflect panic, but real, albeit unspecified, concerns about the economic impact of travel bans, social distance measures and supply chain disruptions. Trade will stabilize once the prospect is clarified. New information – a coronavirus vaccine, a lower infection rate than anticipated, efforts to support the sectors – will help drive up share prices. Action taken by the Federal Reserve on Sunday to improve liquidity, including a new round of quantitative easing of 700 billion USD, a reduction in base interest rates and swaps with foreign central banks, proved insufficient but shows that international authorities are beginning to coordinate efforts.

The analogy with Roosevelt’s bank holiday of 1933 is misleading. The banks are not markets, their weekly closing was intended to halt the withdrawal of money and to introduce the then-new deposit guarantee scheme before reopening. There is no indication that market closures will be accompanied by such significant reforms. In the past, exchanges usually closed only because of physical disturbance: the New York Stock Exchange stopped shortly after Hurricane Sandy and the September 11 terrorist attacks.

There are alternative measures to calm turbulence. The Australian regulator has asked institutions to cut their trade by a quarter on Monday as volumes risked congestion. High-frequency trading was a key issue. Circuit breakers that close markets after a sharp downturn and create free space may need to expand. Exchanges may also wish to consider “irregularities” that delay the execution of trades.

Governments must focus first on public health and then on their fiscal response. This will do more to stabilize markets than close them. With the central banks already boasting most of their patrons, finance ministers will have to use government balances to make the recession as shallow as possible, whether through providing loans to troubled businesses or through social assistance for workers.

Closing markets would now increase the risk of collapse once they reopen if economic turmoil continues during the shutdown. Remaining open, they send a powerful message that more action is needed: the central banks alone cannot hope to meet the challenge posed by the pandemic, while the Governments must act swiftly and not shirk their responsibilities.