ABSTRACT
The chapter examines whether and to what extent government interventions influence changes in sovereign risk. Using sovereign ratings as the main measure of the sovereign risk of 35 OECD countries, we investigate (i) how government interventions – bailout, liquidity support, blanket guarantees, and nationalization – implemented during the global financial crisis (GFC) (2008–2016) affected changes in sovereign risk and (ii) the relation between COVID-19-related measures and changes in sovereign risk (December 2019 versus December 2020). Our results reveal that bailouts were the main intervention measure affecting the changes in sovereign risk during the GFC. As for the COVID-19 intervention measures, despite the measures being sizeable, the sovereign risk does not seem to be permanently affected, as most countries did not experience a significant change in their ratings.
