Impact of COVID-19 on sovereign risk of emerging markets and developing Economies (EMDES)

This paper examines the impact COVID-19 has on the sovereign risk of emerging and developing markets and developing economies (EMDES) in ten selected West African countries. The study revealed that the daily documented cases and credit default swap (CDS) spread had an inverse relationship. This points to the fact that governments are likely to default because the available resources will be spent on catering to patients, which would increase their tendency to default. An OLS model was used to estimate the variables; this revealed that there is a higher CDS spread among emerging economies and markets. There exists a positive correlation between the explanatory variable and the explained variable, and this is an indication that the higher the border closure restrictions, the more COVID-19 is controlled, which results in a higher CDS spread among emerging economies and markets. The result concludes that the prevalence of this in these emerging and developing markets and developing economies reduces productivity, hence increasing the danger of default.