Assessing the Impact of Covid-19 Pandemic on Emerging Market Economies’ (EMEs) Sovereign Bond Risk Premium and Fiscal Solvency

The current globalized economic environment has made Emerging Market Economies (EMEs) highly exposed to global economic shocks. During the Covid-19 pandemic, EMEs have been facing increased health costs and heightened demand for fiscal stimulus. In addition, most EMEs experienced currency depreciati...

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Detalles Bibliográficos
Autores principales: Bizuneh, Menna, Geremew, Menelik
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Palgrave Macmillan UK 2021
Materias:
Original Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8436197/
https://www.ncbi.nlm.nih.gov/pubmed/34538974
http://dx.doi.org/10.1057/s41302-021-00201-y
Descripción
Sumario:The current globalized economic environment has made Emerging Market Economies (EMEs) highly exposed to global economic shocks. During the Covid-19 pandemic, EMEs have been facing increased health costs and heightened demand for fiscal stimulus. In addition, most EMEs experienced currency depreciation, reversal in capital flow, decrease in global demand and significant decline in domestic revenue, leading to a potential increase in sovereign bond risk premiums (SRP). Using dynamic panel estimations and focusing on 12 countries, we find that the Covid-19 pandemic impacts SRP primarily through GDP growth and political stability indicators. In addition, we find the real exchange rate and net export to GDP ratio have a statistically significant impact on sovereign bond risk premium.

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