@TechReport{CEPII:2020-08,
author={Anne-Laure Delatte and Alexis Guillaume},
title={Covid 19: a new challenge for the EMU},
year=2020,
month=July,
institution={CEPII},
type={Working Papers},
url={http://www.cepii.fr/CEPII/fr/publications/wp/abstract.asp?NoDoc=12667},
number={2020-08},
abstract={
Although the pandemic was an exogenous shock, it triggered portfolio rebalancing in the Euro Area (EA) implying a divergence of sovereign risk premia in the first phase of the crisis eventually followed by a narrowing of the spreads. We estimate the determinants of sovereign bond spreads in the EA during the pandemic from January 2 2020 to May 25 2020. We find that: 1) the countries’ resilience to the COVID shock depended on healthcare capacity, the strength of the banking sector and the fiscal outlook; 2) during the crisis, ECB speeches were a game changer and made a much greater contribution than securities purchase programs; 3) coordination by the European Council also helped to reduce the spreads but the effect was partly offset by loan-based financial assistance programs.
},
keywords={Sovereign Risk ; European Monetary Union ; Covid ; Public Policy}
}