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Credit Rating And Debt Crises

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Listed:
  • Steinar Holden
  • Gisle James Natvik
  • Adrien Vigier

Abstract

We develop an equilibrium theory of credit rating in the presence of rollover risk. By influencing rational creditors, ratings affect sovereigns' probability of default, which in turn affects ratings. Our analysis reveals a pro†cyclical impact of credit rating: In equilibrium the presence of a rating agency increases default risk when it is high and decreases default risk when it is low.

Suggested Citation

  • Steinar Holden & Gisle James Natvik & Adrien Vigier, 2018. "Credit Rating And Debt Crises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 973-987, May.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:2:p:973-987
    DOI: 10.1111/iere.12293
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    Cited by:

    1. Itay Goldstein & Chong Huang, 2020. "Credit Rating Inflation and Firms' Investments," Journal of Finance, American Finance Association, vol. 75(6), pages 2929-2972, December.
    2. Kyounghun Lee & Frederick Dongchuhl Oh, 2021. "Credit ratings and liquidity crises," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(3), pages 309-324, September.
    3. Boumparis, Periklis & Milas, Costas & Panagiotidis, Theodore, 2019. "Non-performing loans and sovereign credit ratings," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 301-314.
    4. Lorenzo Menna & Martín Tobal, 2021. "Communication of Credit Rating Agencies and Financial Markets," Working Papers 80, Red Nacional de Investigadores en Economía (RedNIE).

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