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Sovereign risk assessment and agency credit ratings

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  • Richard Cantor
  • Frank Packer

Abstract

Sovereign ratings are gaining importance as more governments with greater default risk borrow in international bond markets. However, while the ratings have proved useful to governments seeking market access, the difficulty of assessing sovereign risk has led to agency disagreements and public controversy over specific rating assignments. Recognising this difficulty, the financial markets have shown some scepticism toward sovereign ratings when pricing issues. Copyright Blackwell Publishers Ltd. 1996.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:eufman:v:2:y:1996:i:2:p:247-256
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    References listed on IDEAS

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    1. Ilse Mintz, 1951. "Introduction to "Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930"," NBER Chapters,in: Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930, pages 1-7 National Bureau of Economic Research, Inc.
    2. Ilse Mintz, 1951. "Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930," NBER Books, National Bureau of Economic Research, Inc, number mint51-1, July-Dec.
    3. W. Braddock Hickman, 1958. "Index to "Corporate Bond Quality and Investor Experience"," NBER Chapters,in: Corporate Bond Quality and Investor Experience, pages 531-536 National Bureau of Economic Research, Inc.
    4. 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.
    5. Longstaff, Francis A & Schwartz, Eduardo S, 1995. " A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July.
    6. W. Braddock Hickman, 1958. "Corporate Bond Quality and Investor Experience," NBER Books, National Bureau of Economic Research, Inc, number hick58-1, July-Dec.
    7. W. Braddock Hickman, 1958. "Introduction and Summary of Findings to "Corporate Bond Quality and Investor Experience"," NBER Chapters,in: Corporate Bond Quality and Investor Experience, pages 3-27 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Morris Goldstein & Graciela Kaminsky & Carmen Reinhart, 2017. "Methodology and Empirical Results," World Scientific Book Chapters,in: TRADE CURRENCIES AND FINANCE, chapter 11, pages 397-436 World Scientific Publishing Co. Pte. Ltd..
    2. Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, World Bank Group, vol. 16(2), pages 151-170, August.
    3. Jianming Kou & Simone Varotto, 2008. "Timeliness of Spread Implied Ratings," European Financial Management, European Financial Management Association, vol. 14(3), pages 503-527.
    4. Johannes Fedderke, 2013. "Promotion and Relegation between Country Risk Classes as Maintained by Country Risk Rating Agencies," Working Papers 376, Economic Research Southern Africa.
    5. Qi, Yaxuan & Roth, Lukas & Wald, John K., 2010. "Political rights and the cost of debt," Journal of Financial Economics, Elsevier, vol. 95(2), pages 202-226, February.
    6. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
    7. Agliardi, Elettra & Agliardi, Rossella & Pinar, Mehmet & Stengos, Thanasis & Topaloglou, Nikolas, 2012. "A new country risk index for emerging markets: A stochastic dominance approach," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 741-761.
    8. Brooks, Robert & Faff, Robert W. & Hillier, David & Hillier, Joseph, 2004. "The national market impact of sovereign rating changes," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 233-250, January.
    9. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fixing for Your Life," NBER Working Papers 8006, National Bureau of Economic Research, Inc.
    10. Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 917-946, October.
    11. Paul M. Vaaler & Gerry McNamara, 2004. "Crisis and Competition in Expert Organizational Decision Making: Credit-Rating Agencies and Their Response to Turbulence in Emerging Economies," Organization Science, INFORMS, vol. 15(6), pages 687-703, December.
    12. repec:bla:eufman:v:15:y:2009:i:5:p:891-922 is not listed on IDEAS
    13. Steven A. Block & Burkhard N. Schrage & Paul M. Vaaler, 2003. "DEMOCRACY???S SPREAD: Elections and Sovereign Debt in Developing Countries," William Davidson Institute Working Papers Series 2003-575, William Davidson Institute at the University of Michigan.
    14. 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.
    15. Grzegorz Waszkiewicz, 2015. "Political Risk and National Debt Markets in Advanced Economies," Proceedings of FIKUSZ 2015,in: Jolán Velencei (ed.), Proceedings of FIKUSZ '15, pages 263-275 Óbuda University, Keleti Faculty of Business and Management.

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