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Sovereign debt default risk and Covid-19 - the impact of the Covid-19 pandemic on sovereign default risk and the relevance of fiscal space in developed and developing economies
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Orientador(es)
Resumo(s)
In the first months of the COVID-19 pandemic CDS spreads over the world
ramped up. I study how market perception for sovereign debt default (represented by 5-
year CDS spreads) evolved depending on the intensity of the economic shock caused by
the spread of COVID-19, in developed and developing economies. Using a threshold
model, I find a statistically significant relation between the increase in COVID-19 and
the increase in CDS spreads for developed economies, with that impact being more than
doubled when the country is fiscally constrained. For developing economies, I conclude
that the shock in CDS spreads is mostly driven by global-risk factors.
Descrição
Palavras-chave
Sovereign default Covid-19 Fiscal space Threshold estimation