Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises
AbstractThe experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies’ evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets, particularly whether sovereign credit ratings have an impact on the financial stability in emerging market economies. The event study and panel regression results indicate that credit rating agencies have substantial influence on the size and volatility of emerging markets lending. The empirical results are signifi¬cantly stronger in the case of government’s downgrades and negative imminent sover¬eign credit rating actions such as credit watches and rating outlooks than positive ad¬justments by the credit rating agencies while by the market participants’ anticipated sovereign credit rating changes have a smaller impact on financial markets in emerg¬ing economies.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0304.
Length: 48 pages
Date of creation:
Date of revision:
Sovereign Risk; Credit Ratings; Financial Crises;
Other versions of this item:
- Kraussl, Roman, 2005. "Do credit rating agencies add to the dynamics of emerging market crises?," Journal of Financial Stability, Elsevier, vol. 1(3), pages 355-385, April.
- Kraeussl, Roman, 2003. "Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises?," CFS Working Paper Series 2003/18, Center for Financial Studies (CFS).
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-MAC-2006-11-18 (Macroeconomics)
- NEP-SEA-2006-11-18 (South East Asia)
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