Do changes in sovereign credit ratings contribute to financial contagion in emerging market crises?

  • Credit rating changes for long-term foreign currency debt may act as a wake-up call with upgrades and downgrades in one country affecting other financial markets within and across national borders. Such a potential (contagious) rating effect is likely to be stronger in emerging market economies, where institutional investors' problems of asymmetric information are more present. This empirical study complements earlier research by explicitly examining cross-security and cross-country contagious rating effects of credit rating agencies' sovereign risk assessments. In particular, the specific impact of sovereign rating changes during the financial turmoil in emerging markets in the latter half of the 1990s has been examined. The results indicate that sovereign rating changes in a ground-zero country have a (statistically) significant impact on the financial markets of other emerging market economies although the spillover effects tend to be regional.

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Metadaten
Author:Roman KräusslORCiDGND
URN:urn:nbn:de:hebis:30-10271
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2003,22
Series (Serial Number):CFS working paper series (2003, 22)
Document Type:Working Paper
Language:English
Year of Completion:2003
Year of first Publication:2003
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Credit Ratings; Financial Contagion; Sovereign Risk
Issue:This version August 2003
HeBIS-PPN:211240788
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht