Sovereign credit ratings in Latin America and the Caribbean: history and impact on bond spreads

Inés Bustillo, Daniel Perrotti and Helvia Velloso

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this study, we examine the history of sovereign credit ratings in Latin America and the Caribbean, the evolution of credit quality, and the relationship between rating changes and the cost of accessing external financing as reflected in the behavior of sovereign bond spreads. We apply an event study to estimate the impact of credit rating changes on sovereign bond spreads in the past fifteen years. We find that the impact is asymmetric (with a larger impact for downgrades) and is sensitive to both spatial and temporal clustering. The results suggest that the quality of sovereign credit is important in determining the cost of access to private external financing.

Keywords: sovereign credit ratings; Latin America and the Caribbean; country risk spreads; asymmetric effect (search for similar items in EconPapers)
JEL-codes: F36 G14 G15 O54 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-10-01
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Published in Economía, 1, October, 2019, 20(1), pp. 155 - 196. ISSN: 1529-7470

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:123197

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