Do credit rating agencies add to the dynamics of emerging market crises? [An article from: Journal of Financial Stability]

This digital document is a journal article from Journal of Financial Stability, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This study investigates the role of credit rating agencies in international financial markets. With an index of speculative market pressure it is analyzed whether sovereign ratings changes have an impact on the financial stability in emerging market economies. The event study analysis indicates that sovereign rating changes 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 rating actions than in the case of agencies' positive rating adjustments. Sovereign rating changes anticipated by market participants have a smaller impact on financial markets in emerging economies.