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Rating the Rating Agencies

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  • Reinhart, Carmen
  • Goldstein, Morris
  • Kaminsky, Graciela

Abstract

In this study, we begin by assessing the ability of sovereign credit ratings to anticipate crises. In addition, given the wave of sovereign credit ratings downgrades that have followed the crises in Asia, we investigate formally the extent to which credit ratings are reactive. Along the way, we discuss a small but growing literature that examines to what extent financial markets anticipate crises.

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File URL: http://mpra.ub.uni-muenchen.de/24578/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24578.

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Date of creation: 2000
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Handle: RePEc:pra:mprapa:24578

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Related research

Keywords: credit ratings; default; crisis; downgrades; prediction; banks; currency;

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References

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  1. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Center for Development Economics 2008-09, Department of Economics, Williams College.
  2. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  3. Eichengreen, Barry & Rose, Andrew K, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," CEPR Discussion Papers 1828, C.E.P.R. Discussion Papers.
  4. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," NBER Working Papers 5191, National Bureau of Economic Research, Inc.
  5. Goldfajn, Ilan & Valdes, Rodrigo O., 1998. "Are currency crises predictable?," European Economic Review, Elsevier, vol. 42(3-5), pages 873-885, May.
  6. Andrew K. Rose & Lars E.O. Svensson, 1993. "European Exchange Rate Credibility Before the Fall," NBER Working Papers 4495, National Bureau of Economic Research, Inc.
  7. Doukas, John, 1989. "Contagion effect on sovereign interest rate spreads," Economics Letters, Elsevier, vol. 29(3), pages 237-241.
  8. Francis X. Diebold & Glenn D. Rudebusch, 1987. "Scoring the leading indicators," Special Studies Papers 206, Board of Governors of the Federal Reserve System (U.S.).
  9. Kaminsky, Graciela L & Reinhart, Carmen M, 1998. "Financial Crises in Asia and Latin America: Then and Now," American Economic Review, American Economic Association, vol. 88(2), pages 444-48, May.
  10. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
  11. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  12. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
  13. Richard Cantor & Frank Packer, 1996. "Determinants and impacts of sovereign credit ratings," Research Paper 9608, Federal Reserve Bank of New York.
  14. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," IDB Publications 5819, Inter-American Development Bank.
  15. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
  16. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  17. Calvo, Sara & Reinhart, Carmen, 1996. "Capital flows to Latin America : Is there evidence of contagion effects?," Policy Research Working Paper Series 1619, The World Bank.
  18. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
  19. Guillermo Larraín & Helmut Reisen & Julia von Maltzan, 1997. "Emerging Market Risk and Sovereign Credit Ratings," OECD Development Centre Working Papers 124, OECD Publishing.
  20. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
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  22. Jeffrey A. Frankel & Sergio L. Schmukler, 1996. "Crisis, contagion, and country funds: effects on East Asia and Latin America," Proceedings, Federal Reserve Bank of San Francisco, pages 232-266.
  23. Rodrigo Valdés, 1997. "Emerging Market Contagion: Evidence and Theory," Working Papers Central Bank of Chile 07, Central Bank of Chile.
  24. Vicente Galbis, 1993. "High Real Interest Rates Under Financial Liberalization," IMF Working Papers 93/7, International Monetary Fund.
  25. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  26. Velasco, Andres, 1987. "Financial crises and balance of payments crises : A simple model of the southern cone experience," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 263-283, October.
  27. Patrick Honohan, 1997. "Banking system failures in developing and transition countries: Diagnosis and predictions," BIS Working Papers 39, Bank for International Settlements.
  28. Richard Cantor & Frank Packer, 1996. "Sovereign risk assessment and agency credit ratings," European Financial Management, European Financial Management Association, vol. 2(2), pages 247-256.
  29. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1.
  30. repec:fth:inadeb:318 is not listed on IDEAS
  31. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  32. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
  33. Steven B. Kamin & John H. Rogers, 1997. "Output and the real exchange rate in developing countries: an application to Mexico," International Finance Discussion Papers 580, Board of Governors of the Federal Reserve System (U.S.).
  34. J. Saul Lizondo & Peter J. Montiel, 1989. "Contractionary Devaluation in Developing Countries: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 36(1), pages 182-227, March.
  35. Morley, Samuel A, 1992. "On the Effect of Devaluation during Stabilization Programs in LDCs," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 21-27, February.
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