Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises?

Roman Kraeussl
Authors registered in the RePEc Author Service: Roman Kräussl

No 2003/18, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: The experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies' evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets, particularly whether sovereign credit ratings have an impact on the financial stability in emerging market economies. The event study and panel regression results indicate that credit rating agencies have substantial influence on the size and volatility of emerging markets lending. The empirical results are significantly stronger in the case of government's downgrades and negative imminent sovereign credit rating actions such as credit watches and rating outlooks than positive adjustments by the credit rating agencies while by the market participants' anticipated sovereign credit rating changes have a smaller impact on financial markets in emerging economies.

Keywords: Sovereign Risk; Credit Ratings; Financial Crises (search for similar items in EconPapers)
JEL-codes: E44 E47 G15 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Do credit rating agencies add to the dynamics of emerging market crises? (2005)
Working Paper: Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200318

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