The COVID-19 Impact: Evidence from Emerging Markets

39 Pages Posted: 3 Sep 2020 Last revised: 27 Jan 2021

See all articles by Rwan El-Khatib

Rwan El-Khatib

Zayed University - College of Business

Anis Samet

American University of Sharjah - School of Business and Management

Date Written: January 20, 2021

Abstract

The COVID-19 pandemic is impacting global markets through unprecedented circumstances. Fears surrounding such novel virus has led to dramatic market turbulence and massive tumbles in stock prices. In this paper, we explore the impact of COVID-19 on a comprehensive sample of 45 emerging countries. We track the performance of each of the markets during the outbreak using its major stock index and we compute the volatilities using a GARCH (1,1) model. Moreover, we report conventional and Islamic bond issuances and assess investors' perceptions towards credit risk by examining the premiums on sovereign credit default swaps. We then compare the results to the global financial crisis period. We find that indeed COVID-19 has harshly struck the emerging countries driving sharp declines in stock market indices, causing an escalation in volatility levels, and widening the premiums on sovereign credit default swaps. However, such upheavals did not yet reach the global financial crisis levels. We finally examine the reactions of the IMF and local governments and central banks in response to such crisis.

Keywords: COVID-19; Emerging Markets; Volatility; Sovereign Credit Default Swap; Global Financial Crisis

JEL Classification: G01, G11, G12, G14, G15, H12

Suggested Citation

El-Khatib, Rwan and Samet, Anis, The COVID-19 Impact: Evidence from Emerging Markets (January 20, 2021). Available at SSRN: https://ssrn.com/abstract=3685013 or http://dx.doi.org/10.2139/ssrn.3685013

Rwan El-Khatib

Zayed University - College of Business ( email )

Zayed University
P.O. Box 144534
Abu Dhabi
United Arab Emirates

Anis Samet (Contact Author)

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

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