CEPII, Recherche et Expertise sur l'economie mondiale
Covid 19: a new challenge for the EMU


Anne-Laure Delatte
Alexis Guillaume

 Points clés :
  • We estimate the determinants of sovereign bond spreads in the Euro Area during the pandemic from January 2 2020 to May 26 2020.
  • We create a balanced data panel including sanitary, financial and macroeconomic variables for 13 EA members and we construct original variables to capture the different common policy announcements and the monetary and financial assistance packages.
  • We find that resiliency to COVID shock depended on initial fiscal situation, robustness of the banking sector and healthcare capacity.
  • We find differentiated contribution of policy announcements, monetary and financial programs on largely indebted countries.

 Résumé :
While the pandemic was an exogenous shock leading to increasing sovereign debt across the board, the dynamics of sovereign risk premiums has been heterogeneous in the Euro Area (EA). We estimate the determinants of sovereign bond spreads in the EA during the pandemic from January 2 2020 to May 26 2020. We find that resiliency to COVID shock depended on initial fiscal situation, robustness of the banking sector and healthcare capacity. Policy announcements by the ECB and the European executive bodies have been associated with narrowing down the spreads, with differentiated contribution to largely indebted countries. However, while securities purchases by the ECB have unambiguously been associated with lower spreads, the financial assistance package put together by the European Council have contributed to larger spreads, specifically those based on loans.


 Mots-clés : Sovereign risk | European Monetary Union | Covid | Event study

 JEL : F30, F45, H63
CEPII Working Paper
N°2020-08, June 2020

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