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Credit Ratings and Sovereign Debt by B. Paudyn Pdf
Bartholomew Paudyn investigates how governments across the globe struggle to constitute the authoritative knowledge underpinning the political economy of creditworthiness and what the (neoliberal) 'fiscal normality' means for democratic governance.
Credit Ratings and Sovereign Debt by B. Paudyn Pdf
Bartholomew Paudyn investigates how governments across the globe struggle to constitute the authoritative knowledge underpinning the political economy of creditworthiness and what the (neoliberal) 'fiscal normality' means for democratic governance.
The Nonlinear Relationship Between Public Debt and Sovereign Credit Ratings by Metodij Hadzi-Vaskov,Mr.Luca A Ricci Pdf
This study investigates the nonlinear relationship between public debt and sovereign credit ratings, using a wide sample of over one hundred advanced, emerging, and developing economies. It finds that: i) higher public debt lowers the probability of being placed in a higher rating category; ii) the negative debt-ratings relationship is nonlinear and depends on the rating grade itself; and iii) the identified nonlinearity explains the differential impact of debt on ratings in advanced economies versus in emerging markets and developing economies. These results hold for both gross debt and net debt, and are robust to alternative dependent variable definitions, analytical techniques, and empirical specifications. These findings underscore the potential for fiscal consolidation in helping countries achieve a better credit rating.
Sovereign Rating News and Financial Markets Spillovers by Bertrand Candelon,Mr. Amadou N. R. Sy,Mr. Rabah Arezki Pdf
This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets. The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects across Euro zone countries. Rating-based triggers used in banking regulation, CDS contracts, and investment mandates may help explain these results.
An intelligent analysis of the dangers, opportunities, and consequences of global sovereign debt Sovereign debt is growing internationally at a terrifying rate, as nations seek to prop up their collapsing economies. One only needs to look at the sovereign risk pressures faced by Greece, Spain, and Ireland to get an idea of how big this problem has become. Understanding this dilemma is now more important than ever, that's why Robert Kolb has compiled Sovereign Debt. With this book as your guide, you'll gain a better perspective on the essential issues surrounding sovereign debt and default through discussions of national defaults, systemic risk, associated costs, and much more. Historical studies are also included to provide a realistic framework of reference. Contains up-to-date research and analysis on sovereign debt from today's leading practitioners and academics Details the dangers of defaults and their associated systemic risks Explores the past, present, and future of sovereign debt The repercussions of a national default are all-encompassing as global markets are intricately interwoven in the modern world. Sovereign Debt examines what it will take to overcome the challenges of this market and how you can deal with the uncertainty surrounding it.
A Century of Sovereign Ratings by Norbert Gaillard Pdf
The financial difficulties experienced by Greece since 2009 serve as a reminder that countries (i.e., sovereigns) may default on their debt. Many observers considered the financial turmoil was behind us because major advanced countries had adopted stimulus packages to prevent banks from going bankrupt. However, there are rising doubts about the creditworthiness of several advanced countries that participated in the bailouts. In this uncertain context, it is particularly crucial to be knowledgeable about sovereign ratings. This book provides the necessary broad overview, which will be of interest to both economists and investors alike. Chapter 1 presents the main issues that are addressed in this book. Chapters 2, 3, and 4 provide the key notions to understand sovereign ratings. Chapter 2 presents an overview of sovereign rating activity since the first such ratings were assigned in 1918. Chapter 3 analyzes the meaning of sovereign ratings and the significance of rating scales; it also describes the refinement of credit rating policies and tools. Chapter 4 focuses on the sovereign rating process. Chapters 5 and 6 open the black box of sovereign ratings. Chapter 5 compares sovereign rating methodologies in the interwar years with those in the modern era. After examining how rating agencies have amended their methodologies since the 1990s, Chapter 6 scrutinizes rating disagreements between credit rating agencies (CRAs). Chapters 7 and 8 measure the performances of sovereign ratings by computing default rates and accuracy ratios: Chapter 7 looks at the interwar years and Chapter 8 at the modern era. The two chapters assess which CRA assigns the most accurate ratings during the respective periods. Chapters 9 and 10 compare the perception of sovereign risk by the CRAs and market participants. Chapter 9 focuses on the relation between JP Morgan Emerging Markets Bond Index Global spreads and emerging countries’ sovereign ratings for the period 1993–2007. Chapter 10 compares the eurozone members’ sovereign ratings with Credit Default Swap-Implied Ratings (CDS-IRs) during the Greek debt crisis of November 2009–May 2010.
Sovereign Debt and Rating Agency Bias by D. Tennant,M. Tracey Pdf
Sovereign Debt and Credit Rating Bias rejects the notion that credit rating agencies' rigorous and transparent determination of ratings leaves no room for bias, and debunks the myth that the value CRAs place on their reputational capital precludes prolonged biases. To determine the extent of CRAs' biased actions, Tennant and Tracey apply a rigorous methodology to a well-established economic model of the determinants of sovereign debt quality. They present strong evidence of bias against poor countries and demonstrate how biased rating changes could disadvantage such countries and the companies operating therein as they seek access to international capital markets. They discuss plausible explanations for the bias and suggest remedial measures that would help ensure balance in credit rating changes. This book fills an important gap by rigorously examining a long-standing but often ignored concern about the rating practices of credit rating agencies.
Sovereign Credit Ratings Methodology by Ashok Vir Bhatia Pdf
This paper describes and evaluates the sovereign credit ratings methodologies of Standard & Poor's, Moody's Investors Service, and Fitch Ratings. A simple definition of ratings failure-based on ratings stability-is proposed and tested, pointing to falling failure rates, consistent upside bias, and strong interagency correlation. Possible causes of ratings failure are separated into informational, analytical, revenue bias, and other incentive problems, each of which is discussed. The paper seeks to highlight methodological developments after the Asian crisis, particularly with regard to the estimation of contingent liabilities and the assessment of international reserves adequacy.
Mr.Rabah Arezki,Bertrand Candelon,Mr.Amadou N. R. Sy
Author : Mr.Rabah Arezki,Bertrand Candelon,Mr.Amadou N. R. Sy Publisher : International Monetary Fund Page : 29 pages File Size : 43,9 Mb Release : 2011-03-01 Category : Business & Economics ISBN : 9781455227112
Sovereign Rating News and Financial Markets Spillovers by Mr.Rabah Arezki,Bertrand Candelon,Mr.Amadou N. R. Sy Pdf
This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets. The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects across Euro zone countries. Rating-based triggers used in banking regulation, CDS contracts, and investment mandates may help explain these results.
The current degradation of sovereign balance sheets raises very real concerns about how sovereign creditworthiness is measured by credit rating agencies. Given the disastrous economic and social effects of any downgrade, the book offers an alternative and calls for more transparency about the quantitative measures used in calibrating the rating process and how sovereign ratings are validated. It argues that oversight is required and procedures improved, including subjecting methodologies of assessing default to more standardization and monitoring. Sovereign Credit Rating explains the process of sovereign creditworthiness assessment and explores the consequences of possible inaccuracies in the process. Developing an innovative new methodology to assess ratings accuracy, it shows that the announcement of each rating action by the major credit rating agencies show alarming inconsistencies. Written by an internationally recognized author and professor, this unique book will be of interest to researchers and advanced students in corporate governance, accounting, public finance and regulation.
Shadow Sovereign Ratings for Unrated Developing Countries by Dilip Ratha,Prabal De,Sanket Mohapatra Pdf
The authors attempt to predict sovereign ratings for developing countries that do not have risk ratings from agencies such as Fitch, Moody's, and Standard and Poor's. Ratings affect capital flows to developing countries through international bond, loan and equity markets. Sovereign rating also acts as a ceiling for the foreign currency rating of sub-sovereign borrowers. As of the end of 2006, however, only 86 developing countries have been rated by the rating agencies. Of these, 15 countries have not been rated since 2004. Nearly 70 developing countries have never been rated. The results indicate that the unrated countries are not always at the bottom of the rating spectrum. Several unrated poor countries appear to have a 'B' or higher rating, in a similar range as the emerging market economies with capital market access. Drawing on the literature, the analysis presents a stylized relationship between borrowing costs and the credit rating of sovereign bonds. The launch spread rises as the credit rating deteriorates, registering a sharp rise at the investment grade threshold. Based on these findings, a case can be made in favor of helping poor countries obtain credit ratings not only for sovereign borrowing, but for sub-sovereign entities' access to international debt and equity capital. The rating model along with the stylized relationship between spreads and ratings can be useful for securitization and other financial structures, and for leveraging official aid, for improving borrowing terms in poor countries.
Rating Politics by Zsófia Barta,Alison Johnston Pdf
How do countries' political and policy choices affect the credit ratings they receive? Sovereign ratings influence countries' cost of funding, and observers have long worried that rating agencies - these unelected, unappointed, unaccountable, for-profit organizations - can interfere with democratic sovereignty if they assign lower ratings to certain political and policy choices. The questions of whether, how, and why ratings react to policy and politics, however, remain unexplored. Rating Politics opens the black box of sovereign ratings to uncover the logic that drives rating responses to political and policy factors. Relying on statistical analysis of rating scores, interviews with sovereign rating analysts, and a close reading of the official communications of rating agencies about their decisions, Zsófia Barta and Alison Johnston show that ratings penalize center-left governments and many (though not all) policies associated with the center-left agenda. The motivation for such penalties is not rooted in assumptions about how those political and policy features affect growth and debt servicing capacity. Instead, ratings are lower in the presence of those features because they are expected to make a country more vulnerable to market panics whenever the economy is hit by unforeseen shocks, as they signal insufficient willingness and/or ability to engage in determined austerity for the sake of reassuring markets. Since market panics and the resulting "sudden stops" of funding lead to humiliating collapses of ratings, rating agencies attempt to insure themselves against "rating failures" by pre-emptively assigning lower ratings to countries with the "wrong" political and policy mix.
Sovereign Credit Ratings and Spreads in Emerging Markets by Laura Jaramillo,Ms.Michelle Michelle Tejada Pdf
Sovereign investment grade status is often associated with lower spreads in international markets. Using a panel framework for 35 emerging markets between 1997 and 2010, thispaper finds that investment grade status reduces spreads by 36 percent, above and beyond what is implied by macroeconomic fundamentals. This compares to a 5-10 percent reduction in spreads following upgrades within the investment grade asset class, and no impact formovements within the speculative grade asset class, ceteris paribus. While global financial conditions play a central role in determining spreads, market sentiment improves with lower external public debt to GDP levels and higher domestic growth rates.
Managing the Sovereign-Bank Nexus by Mr.Giovanni Dell'Ariccia,Caio Ferreira,Nigel Jenkinson,Mr.Luc Laeven,Alberto Martin,Ms.Camelia Minoiu,Alex Popov Pdf
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Sovereign Debt and Rating Agency Bias by D. Tennant,M. Tracey Pdf
Sovereign Debt and Credit Rating Bias rejects the notion that credit rating agencies' rigorous and transparent determination of ratings leaves no room for bias, and debunks the myth that the value CRAs place on their reputational capital precludes prolonged biases. To determine the extent of CRAs' biased actions, Tennant and Tracey apply a rigorous methodology to a well-established economic model of the determinants of sovereign debt quality. They present strong evidence of bias against poor countries and demonstrate how biased rating changes could disadvantage such countries and the companies operating therein as they seek access to international capital markets. They discuss plausible explanations for the bias and suggest remedial measures that would help ensure balance in credit rating changes. This book fills an important gap by rigorously examining a long-standing but often ignored concern about the rating practices of credit rating agencies.
