Abstract
•We investigate the interconnectedness between sovereign credit risk during COVID-19.•We use a tail-event driven network risk technique.•We construct a network and identify the most credit risk receivers and emitters.•Russia, Brazil, and China are the most credit risk emitter and receiver.
This paper investigates the interconnectedness between sovereign credit risk based on the tail event and network dynamics technique. Specifically, we examine the interdependence in upper tails of sovereign credit default swap in the case of fifteen most COVID-19 affected countries. Empirical findings indicate that connectedness among SCDS spreads changed over time and is higher during the COVID19 outbreak. Russia, Brazil, and China are the most credit risk emitter and receiver during the COVID-19 pandemic.