European Financial Markets Integration and the Politics of Credit Rating Agencies: An Econometric Approach to Study Microeconomic Dynamics and Sustainability

Ciocîrlan Cecilia (), Stancea Andreea () and Plăcintă Dimitrie-Daniel ()
Additional contact information
Ciocîrlan Cecilia: Institute for World Economy, Romanian Academy, Bucharest, Romania
Stancea Andreea: National University of Political Studies and Public Administration, Bucharest, Romania
Plăcintă Dimitrie-Daniel: Bucharest University of Economic Studies, Bucharest, Romania

Proceedings of the International Conference on Business Excellence, 2024, vol. 18, issue 1, 3255-3266

Abstract: On sovereign credit default swaps markets, contagion serves as a sobering reminder of the interconnectedness of global financial systems. Like ripples in a pond, the impact of sovereign default or downgrades can cascade across borders, highlighting the intricate web of dependencies among nations. Utilizing sovereign CDS spreads between 2006-2020 on local European markets, the study employs an event study methodology to assess the effects of rating changes on CDS spreads, focusing on negative events such as sovereign rating downgrades. The findings reveal that negative events have a greater impact on the CDS market than positive events, abnormal returns are higher during economic crises, and states with public debt exceeding the Maastricht criteria experience higher abnormal returns. These results suggest that investors are sensitive to adverse news and risk factors, see opportunities for profit during economic turmoil, and closely monitor fiscal sustainability metrics. Understanding and managing contagion risk in these markets requires not only vigilance but also cooperation and coordination among policymakers and market participants.

Keywords: European financial market; integration; credit rating; microeconomic dynamics; sustainability (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/picbe-2024-0265 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:poicbe:v:18:y:2024:i:1:p:3255-3266:n:1045

DOI: 10.2478/picbe-2024-0265

Access Statistics for this article

Proceedings of the International Conference on Business Excellence is currently edited by Alina Mihaela Dima

More articles in Proceedings of the International Conference on Business Excellence from Sciendo
Bibliographic data for series maintained by Peter Golla ().