CEU Electronic Theses and Dissertations, 2012
| Author | Gáspár, Attila |
|---|---|
| Title | Chasing the Usual Suspect: Sovereign Credit Ratings and Borrowing Costs before and during the Crisis |
| Summary | I study the widespread suspicion that credit rating agencies contribute to financial crises through incorrectly assigning sovereign credit ratings, and thus exacerbating financing difficulties. First I investigate whether an autonomous effect of rating changes on sovereign spreads can be identified, having controlled for changes in the macroeconomic environment. I find an upper bound for such an effect, but it is very small in magnitude, and indirect evidence suggests that its true value could be negligible, which is in contrast with the body of literature that blames credit rating agencies for contributing to the financial turmoil. Then I model sovereign ratings themselves in order to contrast their actual behaviour with model predictions. The estimations suggest neither a distinct pattern of co-movement between model generated ratings and actual ones, nor a big systematic deviation between the two after the onset of the current crisis. On the average, ratings seem to (very mildly) lag behind macroeconomic data, but this does not hold for the period directly preceding the crisis. These findings suggest that the role of rating agencies in exacerbating the crisis (at least regarding sovereign debt financing) is probably exaggerated. |
| Supervisor | Benczur Peter |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2012/gaspar_attila.pdf |
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