 Contagion of fear: Is the impact of COVID‐19 on sovereign risk really indiscriminate?Serhan Cevik and Belma Öztürkkal International Finance, 2021, vol. 24, issue 2, 134-154 Abstract: This paper investigates the impact of infectious diseases on the evolution of sovereign credit default swap (CDS) spreads for a panel of 77 countries. Using annual data over 2004–2020, we find that infectious‐disease outbreaks have no discernible effect on CDS spreads, after controlling for macroeconomic and institutional factors. However, a granular analysis using high‐frequency data indicates that the COVID‐19 pandemic has had a significant impact on CDS spreads. This adverse effect appears to be more pronounced in advanced economies, which may reflect the greater severity of the pandemic and depth of the economic crisis in these countries, at least during the initial stage of the outbreak, as well as underreporting in developing countries due to differences in testing availability and institutional capacity. While more stringent containment measures help lower sovereign CDS spreads, the fiscal burden of these efforts could undermine credit worthiness and eventually push the cost of borrowing higher. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:24:y:2021:i:2:p:134-154 Ordering information: This journal article can be ordered from Access Statistics for this article International Finance is currently edited by Benn Steil More articles in International Finance from Wiley Blackwell |
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