Government Interventions and Sovereign Bond Market Volatility during COVID-19: A Quantile Analysis

Claudiu Albulescu () and Eugenia Grecu ()
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Eugenia Grecu: Management Department, Politehnica University of Timisoara, P-ta Victoriei, No. 2, 300006 Timisoara, Romania

Mathematics, 2023, vol. 11, issue 5, 1-14

Abstract: We test the interaction between governments’ COVID-19 interventions, COVID-19-induced uncertainty, and the volatility of sovereign bonds. Different from previous literature, we investigate the asymmetric response of bond market volatility to both governmental interventions and COVID-19-induced uncertainty. With a focus on the first waves of the pandemic and using a panel quantile approach and a comprehensive dataset of 31 countries worldwide, we document that containment and closure policies tend to amplify volatility. Furthermore, the price variability is augmented by the spread of the pandemic itself. On the contrary, economic support policies have a substantial stabilizing effect on bond price fluctuations. Both phenomena are not subsumed by additional control variables and are robust to multiple considerations. Our findings may serve financial market participants in their risk management decisions, as well as policymakers to better shape their preparedness for future pandemics.

Keywords: COVID-19; government bond price volatility; government policy responses; international financial markets; containment and closure; economic support; panel quantile regression (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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Working Paper: Government Interventions and Sovereign Bond Market Volatility during COVID 19: A Quantile Analysis (2022)
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