Do Changes in Sovereign Credit Ratings Contribute to Financial Contagion in Emerging Market Crises?
AbstractCredit rating changes for long-term foreign cur¬rency debt may act as a wake-up call with upgrades and downgrades in one country af¬fecting other financial markets within and across national borders. Such a potential (contagious) rating effect is likely to be stronger in emerging market economies, where institutional investors’ problems of asymmetric information are more present. This empirical study complements earlier research by explicitly examining cross-security and cross-country contagious rating effects of credit rating agencies’ sovereign risk assessments. In particular, the specific impact of sovereign rating changes during the financial turmoil in emerging markets in the latter half of the 1990s has been examined. The results indicate that sovereign rating changes in a ground-zero country have a (statistically) significant impact on the financial markets of other emerging market economies although the spillover effects tend to be regional.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0314.
Length: 38 pages
Date of creation:
Date of revision:
Sovereign Risk; Credit Ratings; Financial Contagion;
Other versions of this item:
- Kraeussl, Roman, 2003. "Do Changes in Sovereign Credit Ratings Contribute to Financial Contagion in Emerging Market Crises?," CFS Working Paper Series 2003/22, 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
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