Credit Rating Agency Downgrades and the Eurozone Sovereign Debt Crises

Christopher Baum, Margarita Karpava, Dorothea Schäfer and Andreas Stephan

No 6939, EcoMod2014 from EcoMod

Abstract: This paper studies the impact of credit rating agency (CRA) downgrade announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012.GARCH modeling of sovereign bond yields and the value of the EuroCRA downgrade announcements negatively affected the value of the Euro currency and also increased its volatility. Downgrading increased the yields of French, Italian and Spanish bonds but lowered the German bond's yields. We infer from these findings that CRA announcements significantly influenced crisis-time capital allocation in the Eurozone.

Keywords: France; Italy; Germany; Spain; Impact and scenario analysis; Finance (search for similar items in EconPapers)
Date: 2014-07-03
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://ecomod.net/system/files/CRAimpact18_cfb.pdf

Related works:
Journal Article: Credit rating agency downgrades and the Eurozone sovereign debt crises (2016)
Working Paper: Credit Rating Agency Downgrades and the Eurozone Sovereign Debt Crises (2014)
Working Paper: Credit rating agency downgrades and the Eurozone sovereign debt crises (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:006356:6939

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