This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Emerging markets instability: do sovereign ratings affect country risk and stock returns?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Kaminsky, Graciela
Schmukler, Sergio

Additional information is available for the following registered author(s):

Abstract

Financial market instability has been the focus of attention of both academic and policy circles. Rating agencies have been under particular scrutiny lately as promoters of financial excesses, upgrading countries in good times and downgrading them in bad times. Using a panel of emerging economies, this paper examines whether sovereign ratings affect financial markets. The authors find that changes in sovereign ratings have an impact on country risk and stock returns. They also find that these changes are transmitted across countries, with neighbor-country effects being more significant. Rating upgrades (downgrades) tend to occur following market rallies (downturns). Countries with more vulnerable economies, as measured by low ratings, are more sensitive to changes in U.S. interestrates.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/01/30/000265513_20040130101221/Rendered/PDF/wps2678.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2678.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 30 Sep 2001
Date of revision:
Handle: RePEc:wbk:wbrwps:2678

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Roula I. Yazigi).

Related research
Keywords: Environmental Economics&Policies; Payment Systems&Infrastructure; Banks&Banking Reform; Economic Theory&Research; Financial Intermediation; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Financial Intermediation; Insurance&Risk Mitigation;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Giancarol Corsetti & Paolo Pesenti & Nouriel Roubini & Cedric Tille, 1999. "Competitive devaluations: a welfare-based approach," Staff Reports 58, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  2. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
    Other versions:
  4. Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992. " The Effect of Bond Rating Agency Announcements on Bond and Stock Prices," Journal of Finance, American Finance Association, vol. 47(2), pages 733-52, June. [Downloadable!] (restricted)
  5. Steven B. Kamin & Karsten von Kleist, 1999. "The evolution and determinants of emerging market credit spreads in the 1990s," International Finance Discussion Papers 653, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  6. Anthony J. Richards & David Deddouche, 1999. "Bank Rating Changes and Bank Stock Returns - Puzzling Evidence from the Emerging Markets," IMF Working Papers 99/151, International Monetary Fund.
  7. Frankel, Jeffrey & Schmukler, Sergio & Serven, Luis, 2000. "Global transmission of interest rates : monetary independence and the currency regime," Policy Research Working Paper Series 2424, The World Bank. [Downloadable!]
  8. Helmut Reisen & Julia von Maltzan, 1999. "Boom and Bust and Sovereign Ratings," OECD Development Centre Working Papers 148, OECD, Development Centre. [Downloadable!]
    Other versions:
  9. Reinhart, Carmen, 2002. "Sovereign Credit Ratings Before and After Financial Crises," MPRA Paper 7410, University Library of Munich, Germany. [Downloadable!]
  10. Kaminsky, Graciela & Lyons, Richard & Schmukler, Sergio, 2000. "Managers, investors, and crises : mutual fund strategies in emerging markets," Policy Research Working Paper Series 2399, The World Bank. [Downloadable!]
    Other versions:
  11. Michael P. Dooley, 1998. "A model of crises in emerging markets," International Finance Discussion Papers 630, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  12. Calvo, Guillermo A. & Mendoza, Enrique G., 2000. "Rational contagion and the globalization of securities markets," Journal of International Economics, Elsevier, vol. 51(1), pages 79-113, June. [Downloadable!] (restricted)
    Other versions:
  13. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May. [Downloadable!] (restricted)
  15. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June. [Downloadable!] (restricted)
    Other versions:
  16. Guillermo Larraín & Helmut Reisen & Julia von Maltzan, 1997. "Emerging Market Risk and Sovereign Credit Ratings," OECD Development Centre Working Papers 124, OECD, Development Centre. [Downloadable!]
  17. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Acharya, Viral V. & Shin, Hyun Song & Yorulmazer, Tanju, 2009. "A Theory of Slow-Moving Capital and Contagion," CEPR Discussion Papers 7147, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Roman Kraeussl, 2003. "Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises?," CFS Working Paper Series 2003/18, Center for Financial Studies. [Downloadable!]
    Other versions:
  3. Patrice Robitaille & Jennifer E. Roush, 2006. "How do FOMC actions and U.S. macroeconomic data announcements move Brazilian sovereign yield spreads and stock prices?," International Finance Discussion Papers 868, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Roberto Rigobon, 2001. "The Curse of Non-Investment Grade Countries," NBER Working Papers 8636, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Fatih Ozatay, 2008. "Expansionary Fiscal Consolidations: New Evidence from Turkey," Working Papers 0805, TOBB University of Economics and Technology, Department of Economics. [Downloadable!]
  6. Anna Pavlova & Roberto Rigobon, 2005. "Wealth Transfers, Contagion, and Portfolio Constraints," NBER Working Papers 11440, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Moser, Christoph, 2007. "The Impact of Political Risk on Sovereign Bond Spreads - Evidence from Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 24, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  8. Fernandez, Pablo, 2004. "80 common and uncommon errors in company valuation," IESE Research Papers D/550, IESE Business School. [Downloadable!]
    Other versions:
  9. Sergio L. Schmukler & Luis Serven, 2002. "Pricing Currency Risk: Facts and Puzzles from Currency Boards," NBER Working Papers 9047, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Moser, Christoph / Dreher, Axel, 2007. "Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. Georgescu, George, 2007. "Current Account Deficits and Implications on Country Risk of Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 4(4), pages 88-96, December. [Downloadable!]
  12. Fernandez, Pablo & Bilan, Andrada, 2007. "110 common errors in company valuations," IESE Research Papers D/714, IESE Business School. [Downloadable!]
  13. Pavlova, Anna & Rigobon, Roberto, 2008. "The Role of Portfolio Constraints in the International Propagation of Shocks," CEPR Discussion Papers 6647, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  14. Jochen R. Andritzky & Geoffrey J. Bannister & Natalia T. Tamirisa, 2005. "The Impact of Macroeconomic Announcements on Emerging Market Bonds," IMF Working Papers 05/83, International Monetary Fund. [Downloadable!]
    Other versions:
  15. Demir, Firat, 2006. "Volatility of short term capital flows, financial anarchy and private investment in emerging markets," MPRA Paper 3080, University Library of Munich, Germany, revised May 2007. [Downloadable!]
  16. Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  17. Galina Hale, 2005. "Courage to Capital? A Model of the Effects of Rating Agencies on Sovereign Debt Roll–over," The Institute for International Integration Studies Discussion Paper Series iiisdp062, IIIS. [Downloadable!]
    Other versions:
  18. Steven Block & Burkhard N. Schrage & Paul M. Vaaler, 2003. "Democratization’s Risk Premium: Partisan and Opportunistic Political Business Cycle Effects on Sovereign Ratings in Developing Countries," William Davidson Institute Working Papers Series 546, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  19. Roman Kraeussl, 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. [Downloadable!]
    Other versions:
  20. Ratha, Dilip & De, Prabal & Mohapatra, Sanket, 2007. "Shadow sovereign ratings for unrated developing countries," Policy Research Working Paper Series 4269, The World Bank. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to use our services.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.