Title: The impact of compounding COVID-19 and climate risk on sovereign debt
Authors: Luca De Angelis - University of Bologna (Italy) [presenting]
Irene Monasterolo - Vienna University (Austria)
Anja Duranovic - WU Vienna University of Economics and Business (Austria)
Abstract: A country-specific Structural VAR (SVAR) is used to measure the impact of COVID-19 pandemic and climate-related disasters on the sovereign bond risk of the Caribbean countries. In particular, we model the CDS spread change, the bond spread change, the number of deaths by COVID, and one or two variables for climate-related disasters as a vector of endogenous variables. Then, a structural (Cholesky) analysis is put forward to investigate the impact of a shock in climate or pandemic or both (compound risk).