nep-ifn New Economics Papers
on International Finance
Issue of 2021‒04‒26
one paper chosen by
Vimal Balasubramaniam
University of Oxford

  1. Government Interventions and Sovereign Bond Market Volatility during COVID 19 By Claudiu Albulescu; Eugenia Grecu; Adam Zaremba; David Aharon

  1. By: Claudiu Albulescu (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers); Eugenia Grecu (UPT - Politehnica University of Timisoara); Adam Zaremba (Montpellier Business School - Montpellier Business School); David Aharon
    Abstract: We test the interaction between COVID-19 governments' interventions, COVID-19-induced uncertainty, and the volatility of sovereign bonds. Using a panel-quantile approach and a comprehensive dataset of 31 countries worldwide, we document that containment and closure policies tend to amplify volatility. Furthermore, the price variability is augmented by the spread of the pandemic itself. On the contrary, economic support policies have a substantial stabilizing effect on bond price fluctuations. Both phenomena are not subsumed by additional control variables and are robust to multiple considerations. Our findings may serve financial market participants in their risk management decisions, as well as policy makers to better shape their preparedness for future pandemics.
    Keywords: government bond price volatility,COVID-19,government policy responses,international financial markets,containment and closure,economic support,panel quantile regression. JEL classifications: G01
    Date: 2021–04–12

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