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Alternative sources of the lag dynamics of inflation

Listed author(s):
  • Sharon Kozicki
  • Peter A. Tinsley

Data on credit ratings by the agencies with the legal status of Nationally-Recognized Statistical Rating Organizations (NRSROs) show some tendency for one-day downgrades that start from the lowest investment grade, BBB-, to travel more grades than those from neighboring grades. This would be consistent with the lower threshold of the NRSROs’ grade BBB- being at a substantial default probability, but also could occur simply because downgrades to junk severely impair some firms’ operations. A comparison of data from a non-NRSRO agency and an NRSRO shows that the latter’s regrades from BBB moved in the direction of the non-NRSRO’s earlier ratings. This suggests the non-NRSRO defines its grade BBB- more narrowly than the NRSRO.

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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 02-12.

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Date of creation: 2002
Handle: RePEc:fip:fedkrw:rwp02-12
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References listed on IDEAS
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