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To err is human: rating agencies and the interwar foreign government debt crisis

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  • Marc Flandreau
  • Norbert Gaillard
  • Frank Packer

Abstract

During the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we do not find that superior forecasting capacities can explain the agencies' growing importance.

Suggested Citation

  • Marc Flandreau & Norbert Gaillard & Frank Packer, 2010. "To err is human: rating agencies and the interwar foreign government debt crisis," BIS Working Papers 335, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:335
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    References listed on IDEAS

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    1. Ideen und Interessen
      by Tobias Straumann in Never mind the markets on 2012-07-31 09:00:32

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    Cited by:

    1. Amstad, Marlene & Packer, Frank & Shek, Jimmy, 2020. "Does sovereign risk in local and foreign currency differ?," Journal of International Money and Finance, Elsevier, vol. 101(C).
    2. Olivier Accominotti & Barry Eichengreen, 2016. "The mother of all sudden stops: capital flows and reversals in Europe, 1919–32," Economic History Review, Economic History Society, vol. 69(2), pages 469-492, May.
    3. Bussière, M. & Ristiniemi, A., 2012. "Credit Ratings and Debt Crises," Working papers 396, Banque de France.
    4. Marlene Amstad & Steven Kong & Frank Packer & Eli Remolona, 2016. "A spare tire for capital markets: Fostering corporate bond markets in Asia," BIS Papers, Bank for International Settlements, number 85.
    5. Carmen M. Reinhart & Christoph Trebesch, 2014. "A Distant Mirror of Debt, Default, and Relief," NBER Working Papers 20577, National Bureau of Economic Research, Inc.
    6. Carmen M. Reinhart & Christoph Trebesch, 2016. "Sovereign Debt Relief and Its Aftermath," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 215-251.
    7. Marlene Amstad & Frank Packer, 2015. "Sovereign ratings of advanced and emerging economies after the crisis," BIS Quarterly Review, Bank for International Settlements, December.
    8. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
    9. David James Gill, 2015. "Rating the UK: the British government's sovereign credit ratings, 1976–8," Economic History Review, Economic History Society, vol. 68(3), pages 1016-1037, August.
    10. Marc Flandreau, 2013. "Do good sovereigns default? Lessons of history," BIS Papers chapters, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 72, pages 19-25, Bank for International Settlements.
    11. Mitchener, Kris James & Trebesch, Christoph, 2021. "Sovereign Debt in the 21st Century: Looking Backward, Looking Forward," CEPR Discussion Papers 15935, C.E.P.R. Discussion Papers.
    12. Marc Flandreau & Juan Flores & Norbert Gaillard & Sebastian Nieto-Parra, 2011. "The Changing Role of Global Financial Brands in the Underwriting of Foreign Government Debt (1815-2010)," IHEID Working Papers 15-2011, Economics Section, The Graduate Institute of International Studies.
    13. Bradley, Michael & De Lira Salvatierra, Irving & Gulati, Mitu, 2014. "Lawyers: Gatekeepers of the sovereign debt market?," International Review of Law and Economics, Elsevier, vol. 38(S), pages 150-168.

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    Keywords

    sovereign credit ratings; Great Depression; financial crisis; international bond markets;
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