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Credit Rating Agencies and the IPE: Not as influential as thought?

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  • Dimitrios Soudis

Abstract

Do Credit Rating Agencies (CRAs) affect national policy? This study critically examines assertions of a possible convergence to neo-liberal standards induced by sovereign bond ratings. By arguing that the role of the agencies in the global political economy has been exaggerated, the study finds that CRAs do not have a direct causal effect on domestic economic reforms. Employing a sample that covers the great majority of rated countries, it is shown that there is a robust trend towards deregulation and reform in accordance with neo-liberal standards. Nevertheless, sovereign bond ratings are not directly related to this process. Lower rated countries, or those more frequently downgraded, do not differ significantly from the highly rated countries in their pattern of policy reform. This result holds for policy domains such as regulation of credit, labour and business, inflation levels, legal structure and security of property rights, and the size of the public sector. It is concluded that the role of the CRAs as potential instigators of domestic reform is limited.

Suggested Citation

  • Dimitrios Soudis, 2015. "Credit Rating Agencies and the IPE: Not as influential as thought?," Review of International Political Economy, Taylor & Francis Journals, vol. 22(4), pages 813-837, August.
    • Handle: RePEc:taf:rripxx:v:22:y:2015:i:4:p:813-837
    DOI: 10.1080/09692290.2014.957234
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    References listed on IDEAS

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    1. Mr. John Kiff & Sylwia Nowak & Miss Liliana B Schumacher, 2012. "Are Rating Agencies Powerful? An Investigation Into the Impact and Accuracy of Sovereign Ratings," IMF Working Papers 2012/023, International Monetary Fund.
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    Cited by:

    1. Alicja Malewska, 2021. "Failed Attempt to Break Up the Oligopoly in Sovereign Credit Rating Market after Financial Crises," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 15(2), April.

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