{"title":"Contagion of fear: Is the impact of COVID-19 on sovereign risk really indiscriminate?","authors":"Serhan Cevik, Belma Öztürkkal","doi":"10.1111/infi.12397","DOIUrl":null,"url":null,"abstract":"<p>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.</p>","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":null,"pages":null},"PeriodicalIF":16.4000,"publicationDate":"2021-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/infi.12397","citationCount":"24","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/infi.12397","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 24
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.
期刊介绍：
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.
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