Rating Agencies and Sovereign Debt Rollover
AbstractIn order to explore how credit ratings may affect financial markets, we analyze a global game model of debt roll-over in which heterogeneous investors act strategically. We find that the addition of the rating agency has a non-monotonic effect on the probability of default and the magnitude of the response of capital flows to changes in fundamentals. We also establish that introducing a rating agency can bring multiple equilibria to a market that otherwise would have a unique equilibrium.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 6 (2006)
Issue (Month): 2 (September)
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Web page: http://www.degruyter.com
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- Holden, Steinar & Natvig, Gisle James & Vigier, Adrien, 2012.
"An Equilibrium Model of Credit Rating Agencies,"
01/2013, Oslo University, Department of Economics.
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- Mahmoud Elamin, 2012. "Believe only what you see: credit rating agencies, structured finance, and bonds," Working Paper 1222, Federal Reserve Bank of Cleveland.
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