On the Self-Fulfilling Prophecy of Changes in Sovereign Ratings
AbstractWe empirically investigate the dynamic interactions between sovereign ratings and the macroeconomic environment. We use a Panel VAR on annual data for European countries from 1986-2010. Our results provide evidence for a significant two-way interaction between the macroeconomic environment and changes in sovereigns' ratings. Thus, rating changes are able to exacerbate a country's boom-bust cycle.
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Date of creation: 09 Feb 2012
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sovereign ratings; Panel VAR; self-fulfilling prophecy.;
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- Richard Cantor & Frank Packer, 1996.
"Determinants and impacts of sovereign credit ratings,"
9608, Federal Reserve Bank of New York.
- Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
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