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Output spillovers from changes in sovereign credit ratings

Sheng-Syan Chen, Hsien-Yi Chen, Shu-Ling Yang and Chong-Chuo Chang

Journal of International Money and Finance, 2016, vol. 63, issue C, 48-63

Abstract: This research examines how a sovereign rating revision of one country influences the economic growth rates of other countries. Rating revisions have significant output spillover effects: A one-notch upgrade (downgrade) prompts on average a significant downward revision of about 0.03% (0.07%) in the consensus forecast of annual economic growth rates of other countries in the two-month period after the event. The spillovers are transmitted through direct and indirect trade and financial linkages between event and non-event countries. The evidence indicates that a predominance of differential (common) spillovers leads upgrades (downgrades) to produce adverse output effects for other countries.

Keywords: Sovereign credit rating revision; Output spillover; Economic growth (search for similar items in EconPapers)
JEL-codes: F34 F62 G24 H63 O47 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jimonfin.2016.01.007

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