Return and volatility transmission between emerging markets and US debt throughout the pandemic crisis

Zaghum Umar, Youssef Manel, Yasir Riaz and Mariya Gubareva

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: In this study, we investigate the return and volatility spillovers between emerging markets and US government bonds during the Covid-19-triggered pandemic by accounting for the market sentiment captured by the media coverage index. To study the dynamic spillovers, we use a TVP-VAR approach. Our results show a significant increase in the dynamic connectedness between media coverage, emerging market bonds, and US bonds, as well as between the respective volatilities, especially during the early phases of the Covid-19 pandemic, with the highest values observed in March 2020. The emerging market bonds appear to be net transmitters to the system and lead the system; whereas, the US bond market is the net receiver. These results show that, during the pandemic, the US bond market is less vulnerable and more resilient to changes in market sentiment vis-à-vis the fixed-income markets of the developing countries.

Keywords: Covid-19; TVP-VAR; Emerging market bonds; Media sentiment; US bonds; Dynamic connectedness (search for similar items in EconPapers)
JEL-codes: E43 G01 G12 G15 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000706

DOI: 10.1016/j.pacfin.2021.101563

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