Deadly Debt Crises: COVID-19 in Emerging Markets

• 成果类型: Article
• 署名作者: Arellano, Cristina; Bai, Yan; Mihalache, Gabriel
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of Minnesota System; University of Minnesota Twin Cities; University of Rochester; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); University System of Ohio; Ohio State University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdad058
• 发表日期: 2024
• 页码: 1243-1290
• 关键词: default; maturity; cycle; RISK

摘要

Emerging markets have experienced large human and economic costs from coronavirus disease 2019, and their tight fiscal space has limited the support extended to their citizens. We study the impact of an epidemic on economic and health outcomes by integrating epidemiological dynamics into a sovereign default model. The sovereign's option to default tightens fiscal space and results in an epidemic with limited mitigation and depressed consumption. A quantitative analysis of our model accounts well for the dynamics of fatalities, social distancing, consumption, sovereign debt, and spreads in Latin America. We find that because of default risk, the welfare cost of the pandemic is about a third higher than it is in a version of the model with perfect financial markets. We study debt relief programs and find a compelling case for their implementation. These programs deliver large social gains, improving health and economic outcomes for the country at no cost to international lenders or financial institutions.