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Are Sovereign Credit Ratings Overrated?

Author

Listed:
  • Davor Kunovac

    () (Croatian National Bank)

  • Rafael Ravnik

    () (Croatian National Bank)

Abstract

Abstract In this paper we examine the relevance of changes in sovereign credit rating for the borrowing cost of EU countries. Our results indicate that discretionary credit rating announcements are only of limited economic importance for the borrowing cost of these countries. It seems that rating agencies do not reveal important new information to financial markets, in addition to that already contained in the underlying fundamentals. Hence, given the sentiment in financial markets, the borrowing cost of a country can only be reduced by improving macroeconomic and fiscal fundamentals.

Suggested Citation

  • Davor Kunovac & Rafael Ravnik, 2017. "Are Sovereign Credit Ratings Overrated?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(2), pages 210-242, June.
  • Handle: RePEc:pal:compes:v:59:y:2017:i:2:d:10.1057_s41294-017-0024-6
    DOI: 10.1057/s41294-017-0024-6
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    References listed on IDEAS

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