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Government Interventions and Sovereign Bond Market Volatility during COVID-19: A Quantile Analysis

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  • Claudiu Tiberiu Albulescu

    (Management Department, Politehnica University of Timisoara, P-ta Victoriei, No. 2, 300006 Timisoara, Romania)

  • Eugenia Grecu

    (Management Department, Politehnica University of Timisoara, P-ta Victoriei, No. 2, 300006 Timisoara, Romania)

Abstract

We test the interaction between governments’ COVID-19 interventions, COVID-19-induced uncertainty, and the volatility of sovereign bonds. Different from previous literature, we investigate the asymmetric response of bond market volatility to both governmental interventions and COVID-19-induced uncertainty. With a focus on the first waves of the pandemic and 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 policymakers to better shape their preparedness for future pandemics.

Suggested Citation

  • Claudiu Tiberiu Albulescu & Eugenia Grecu, 2023. "Government Interventions and Sovereign Bond Market Volatility during COVID-19: A Quantile Analysis," Mathematics, MDPI, vol. 11(5), pages 1-14, February.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:5:p:1171-:d:1081795
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