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Boom and Bust and Sovereign Ratings


  • Helmut Reisen
  • Julia von Maltzan


The 1990s have witnessed pronounced boom-bust cycles in emerging-markets lending, culminating in the Asian financial and currency crisis of 1997-98. By examining the links between sovereign credit ratings and dollar bond yield spreads over 1989-97, this paper aims at broad empirical content for judging whether the three leading rating agencies — Moody’s, Standard ' Poor’s and Fitch IBCA — can intensify or attenuate boom-bust cycles in emerging-market lending. First, an event study exploring the market response for 30 trading days before and after rating announcements finds a significant impact of imminent upgrades and implemented downgrades for a combination of ratings by the three leading agencies, despite strong anticipation of rating events. Second, a Granger causality test, by correcting for joint determinants of ratings and yield spreads, finds that changes in sovereign ratings are mutually interdependent with changes in bond yields. These findings are based on many more ... Les années 90 ont été marquées par une succession de cycles d’expansion-contraction de grande ampleur dans les opérations de prêts destinés aux marchés émergents. Cette volatilité a culminé avec la crise monétaire et financière qui a atteint l’Asie en 1997-98. La relation entre les notations de crédit souverain et les écarts de rendement des obligations en dollar sur la période 1989-97 est examinée dans ce document. Sur la base de ces données empiriques, les auteurs visent à évaluer si les trois principales agences de notation — Moody’s, Standard ' Poor’s et Fitch IBCA — amplifient ou atténuent les cycles d’expansion-contraction des opérations de prêt sur les marchés émergents. En premier lieu, la réponse du marché avant et après la diffusion des notations est étudiée sur 30 jours ouvrables. Il en ressort que, en dépit d’une anticipation élevée des annonces, l’impact des hausses pressenties et des notations à la baisse est important, pour une combinaison des cotes des trois agences ...

Suggested Citation

  • Helmut Reisen & Julia von Maltzan, 1999. "Boom and Bust and Sovereign Ratings," OECD Development Centre Working Papers 148, OECD Publishing.
  • Handle: RePEc:oec:devaaa:148-en
    DOI: 10.1787/251521656447

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    credit rating; currency crisis; emerging markets; sovereign risk;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services


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