Rating Agencies and Sovereign Debt Rollover

Mark Carlson and Hale Galina B ()
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Hale Galina B: Federal Reserve Bank of San Francisco

The B.E. Journal of Macroeconomics, 2006, vol. 6, issue 2, 32

Abstract: In order to explore how credit ratings may affect financial markets, we analyze a global game model of debt roll-over in which heterogeneous investors act strategically. We find that the addition of the rating agency has a non-monotonic effect on the probability of default and the magnitude of the response of capital flows to changes in fundamentals. We also establish that introducing a rating agency can bring multiple equilibria to a market that otherwise would have a unique equilibrium.

Keywords: credit rating; rating agency; sovereign debt; sovereign default; global game (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (14)

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DOI: 10.2202/1534-5998.1375

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