COVID-19 pension raids and sovereign risk

2025. International Review of Economics and Finance.

Jaime Bastias, José Luis Ruiz

Abstract:

Chile was among the nations where the regulations allow individuals to make withdrawals from their retirement savings to cope with the COVID-19 pandemic. We analyze these quasi-natural experiments using the Autoregressive Distributed Lag Stationarity model and event study methodology spanning from March 2020 to April 2021. We find evidence that the first regulatory shock reduces the spread between the ten-year nominal sovereign bond yield and the annual interbank rate and amplify the impact of agent economic perceptions in the short term. These findings are useful for policymakers and investors regarding to adverse repercussions of this policy on the economy going forward.

Palabras claves: Regulatory shocks, pension funds, bond spread rates, emerging markets, COVID-19.

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