Abstract
ABSTRACT We employ the state-dependent local projection method to identify the dynamic risk aggravation effects on Treasury market volatilities and risk spillovers under both local and global COVID-19 pandemic shocks. We find that emerging markets suffer more instability as risk receivers during the pandemic. Local pandemic shock sharpens the risk spillover mainly in the short run, especially when global risk is high, while global pandemic shock aggravates spillover in the medium run led by economic depression expectations. The results are not only helpful to encourage governments to deepen cooperation in combating the pandemic but also alert authorities to pay more attention to imported financial risk.
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