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Credit Rating Agencies, Finance and Growth

  • Anabela Ramos

    ()

    (Faculty of Economics, University of Coimbra)

  • Marta Simôes

    ()

    (Faculty of Economics, University of Coimbra and Research Fellow, GEMF – Grupo de Estudos Monetários e Financeiros, Faculty of Economics, University of Coimbra)

The aim of this chapter is to initiate a reflection about the potential connection between Credit Rating Agencies (CRA) performance and long-run macroeconomic performance based on the idea that inaccurate and volatile rating decisions can hinder the development of the financial system and therefore growth. This reflection is illustrated by means of the analysis of the evolution and correlations between relevant data on financial system development and growth for a sample of countries from the Euro Zone over the period 1990-2010. The preliminary descriptive analysis seems to corroborate the former concern since we found a positive correlation between different indicators of the development of the financial system, respectively, liquid liabilities, domestic credit to the private sector, and stock market capitalization, and real per capita output. The concerns with the economic impact of the functioning and performance of CRA should thus, in our opinion, also take a longer term perspective since they are a pillar of the financial system, which in turn is fundamental to sustain economic growth. Further restructuring and new interventions in the sector are needed in order to increase transparency and efficiency of CRA activity, preventing in this way longer term consequences in terms of growth potential.

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This chapter was published in:
  • Paulino Teixeira & António Portugal Duarte & Srdjan Redzepagic & Dejan Eric (ed.), 2012. "European Integration Process in Western Balkan Countries," Books, Institute of Economic Sciences, edition 1, volume 1, number euinpro, Spring.
  • This item is provided by Institute of Economic Sciences in its series Book Chapters with number euinpro-10.
    Handle: RePEc:ibg:chaptr:euinpro-10
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    1. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
    2. Rabah Arezki & Bertrand Candelon & Amadou Sy, 2011. "Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis," CESifo Working Paper Series 3411, CESifo Group Munich.
    3. Marwan Elkhoury, 2007. "Credit Rating Agencies And Their Potential Impact On Developing Countries," UNCTAD Discussion Papers 186, United Nations Conference on Trade and Development.
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