Ratings Performance, Regulation and the Great Depression: Lessons from Foreign Government Securities
AbstractDuring the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. We study the process through which they received this regulatory license. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we show that superior forecasting capacities cannot explain the agencies’ growing importance. We argue that the agencies’ perceived lack of conflicts of interest (in contrast to other financial intermediaries) was a major factor in bringing them to the forefront of a new regulatory regime.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7328.
Date of creation: Jun 2009
Date of revision:
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Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- N2 - Economic History - - Financial Markets and Institutions
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-HIS-2009-07-03 (Business, Economic & Financial History)
- NEP-REG-2009-07-03 (Regulation)
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