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The COVID-19 and bond spreads

Rui Esteves and Nathan Sussman ()

The Economists' Voice, 2020, vol. 17, issue 1, 10

Abstract: Financial markets reacted with a vengeance to the COVID-19 pandemic. We argue that while the spread of the pandemic is statistically significant in explaining changes to bond spreads, it has little additional explanatory power over variables that capture financial stress. Financial markets reacted as in any international financial crisis by penalizing emerging economies exposing existing vulnerabilities. This finding highlights the need for credible, but flexible, sovereign currencies and the need to build up liquidity reserves.

Keywords: COVID19; financial markets; emerging markets; bond spreads; monetary policy (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/ev-2020-0013

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