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The role of rating agencies in financial crises: event studies from the Asian flu


  • Makram El-Shagi


Based on case studies from countries that have been hit hardest by the Asian financial crisis of 1997, the present paper shows that the accusation that sovereign ratings led to a severe acceleration of the crisis is unconvincing and that the empirical method often used to support accusations against rating agencies is inappropriate for the problem under analysis. Rather, it must be emphasised that ratings were downgraded in most countries very shortly before the end of the crisis. In some countries, the ratings were even further downgraded after the end of the crisis as countries started to recover. This is not in line with the thesis that the crisis was accelerated by rating agencies. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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  • Makram El-Shagi, 2010. "The role of rating agencies in financial crises: event studies from the Asian flu," Cambridge Journal of Economics, Oxford University Press, vol. 34(4), pages 671-685.
  • Handle: RePEc:oup:cambje:v:34:y:2010:i:4:p:671-685

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    Cited by:

    1. El-Shagi, Makram & von Schweinitz, Gregor, 2015. "The Joint Dynamics of Sovereign Ratings and Government Bond Yields," IWH Discussion Papers 4/2015, Halle Institute for Economic Research (IWH).
    2. El-Shagi, Makram & von Schweinitz, Gregor, 2017. "Why they keep missing: An empirical investigation of rational inattention of rating agencies," IWH Discussion Papers 1/2017, Halle Institute for Economic Research (IWH).
    3. Manfred Gärtner & Björn Griesbach & Florian Jung, 2011. "PIGS or Lambs? The European Sovereign Debt Crisis and the Role of Rating Agencies," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(3), pages 288-299, August.
    4. El-Shagi, Makram, 2016. "Much ado about nothing: Sovereign ratings and government bond yields in the OECD," IWH Discussion Papers 22/2016, Halle Institute for Economic Research (IWH).
    5. Shaen Corbet, 2014. "The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 83-92.
    6. repec:mth:ber888:v:7:y:2017:i:1:p:199-226 is not listed on IDEAS
    7. Richard J. Cebula, 2013. "Budget Deficits, Economic Freedom, and Economic Growth in OECD Nations: P2SLS Fixed-Effects Estimates, 2003–2008," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Spring 20), pages 75-96.
    8. Kalteier, Eva-Maria & Posch, Peter N., 2013. "Sovereign asset values and implications for the credit market," Review of Financial Economics, Elsevier, vol. 22(2), pages 53-60.
    9. Posch, Peter N & Kalteier, Eva-Maria, 2013. "Sovereign Asset Values and Implications for the Credit Market," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79986, Verein für Socialpolitik / German Economic Association.
    10. repec:kap:iaecre:v:17:y:2011:i:3:p:288-299 is not listed on IDEAS
    11. El-Shagi, Makram & von Schweinitz, Gregor, 2015. "Risk and return—Is there an unholy cycle of ratings and yields?," Economics Letters, Elsevier, vol. 129(C), pages 49-51.
    12. Manfred G?rtner & Bj?rn Griesbach, 2017. "Rating Agencies, Self-Fulfilling Prophecy and Multiple Equilibria? An Empirical Model of the European Sovereign Debt Crisis 2009-2011," Business and Economic Research, Macrothink Institute, vol. 7(1), pages 199-226, June.

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