The Curse of Non-Investment Grade Countries
Mexico was upgraded from non-investment to investment grade in March of 2000. This paper examines the impact of this event on the properties of the transmission of shocks between Argentina and Mexico. The paper shows that there is a statistically significant change in the propagation of shocks the day the upgrade was announced. Furthermore, it is found that the parameters that shifted are those explaining the diffusion of shocks through the means, while the transmission through the variances remained stable. Moreover, the change in the estimated coefficients can explain more than a third in the unconditional comovement that these assets experienced before the upgrade. From the methodological point of view, the paper offers an identification procedure based on conditional heteroskedasticity (ARCH) that solves the problem of estimation in a linear simultaneous equations model that can be used in other Macro and Finance applications.
|Date of creation:||Dec 2001|
|Date of revision:|
|Publication status:||published as Rigobon, Roberto. "The Curse Of Non-Investment Grade Countries," Journal of Development Economics, 2002, v69(2,Dec), 423-449.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tauchen, George E. & Gallant, A. Ronald, 1995.
"Which Moments to Match,"
95-20, Duke University, Department of Economics.
- Gourieroux, C. & Monfort, A. & Renault, E., 1992.
92.279, Toulouse - GREMAQ.
- Roberto Rigobon, 2001.
"Contagion: How to Measure It?,"
NBER Working Papers
8118, National Bureau of Economic Research, Inc.
- William P. Killeen & Richard K. Lyons & Michael J. Moore, 2001.
"Fixed versus Flexible: Lessons from EMS Order Flow,"
NBER Working Papers
8491, National Bureau of Economic Research, Inc.
- Killeen, William P. & Lyons, Richard K. & Moore, Michael J., 2006. "Fixed versus flexible: Lessons from EMS order flow," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 551-579, June.
- Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
- Sebastian Edwards, 1998. "Interest Rate Volatility, Capital Controls, and Contagion," NBER Working Papers 6756, National Bureau of Economic Research, Inc.
- Gabriele Fiorentini & Enrique Sentana Iváñez, 1997.
"Identification, estimation and testing of conditionally heteroskedastic factor models,"
Working Papers. Serie AD
1997-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Sentana, Enrique & Fiorentini, Gabriele, 2001. "Identification, estimation and testing of conditionally heteroskedastic factor models," Journal of Econometrics, Elsevier, vol. 102(2), pages 143-164, June.
- Sentana, E. & Fiorentini, G., 1997. "Identification, Estimation and Testing of Conditionally Heteroskedastic Factor Model," Papers 9709, Centro de Estudios Monetarios Y Financieros-.
- Ronald I. McKinnon & Huw Pill, 1996. "The overborrowing syndrome: are East Asian economies different?," Proceedings, Federal Reserve Bank of San Francisco, pages 322-355.
- Roberto Rigobon, 1999. "On the Measurement of the International Propagation of Shocks," NBER Working Papers 7354, National Bureau of Economic Research, Inc.
- Diebold, Francis X & Nerlove, Marc, 1989. "The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar..
- Kristin Forbes & Roberto Rigobon, 1999.
"No Contagion, Only Interdependence: Measuring Stock Market Co-movements,"
NBER Working Papers
7267, National Bureau of Economic Research, Inc.
- Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
- Fortin, Pierre & Keil, Manfred & Symons, James, 2001. "The Sources of Unemployment in Canada, 1967-91: Evidence from a Panel of Regions and Demographic Groups," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 67-93, January.
- Engle, Robert F. & Ng, Victor K. & Rothschild, Michael, 1990.
"Asset pricing with a factor-arch covariance structure : Empirical estimates for treasury bills,"
Journal of Econometrics,
Elsevier, vol. 45(1-2), pages 213-237.
- Robert F. Engle & Victor Ng & Michael Rothschild, 1988. "Asset Pricing with a Factor Arch Covariance Structure: Empirical Estimates for Treasury Bills," NBER Technical Working Papers 0065, National Bureau of Economic Research, Inc.
- Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
- Stefan Gerlach & Frank Smets, 1994.
"Contagious speculative attacks,"
BIS Working Papers
22, Bank for International Settlements.
- Kaminsky, Graciela & Schmukler, Sergio, 2001.
"Emerging markets instability: do sovereign ratings affect country risk and stock returns?,"
Policy Research Working Paper Series
2678, The World Bank.
- Graciela Kaminsky & Sergio L. Schmukler, 2002. "Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?," World Bank Economic Review, World Bank Group, vol. 16(2), pages 171-195, August.
- King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994.
"Volatility and Links between National Stock Markets,"
Econometric Society, vol. 62(4), pages 901-33, July.
- Mervyn King & Enrique Sentana & Sushil Wadhwani, 1990. "Volatiltiy and Links Between National Stock Markets," NBER Working Papers 3357, National Bureau of Economic Research, Inc.
- Gromb, Denis & Vayanos, Dimitri, 2001.
"Equilibrium and Welfare in Markets with Financially Constrained Arbitrageurs,"
CEPR Discussion Papers
3049, C.E.P.R. Discussion Papers.
- Gromb, Denis & Vayanos, Dimitri, 2002. "Equilibrium and welfare in markets with financially constrained arbitrageurs," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 361-407.
- Denis Gromb & Dimitri Vayanos, 2002. "Equilibrium and welfare in markets with financially constrained arbitrageurs," LSE Research Online Documents on Economics 448, London School of Economics and Political Science, LSE Library.
- Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
- repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8636. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.