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Sovereign ratings of advanced and emerging economies after the crisis

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  • Marlene Amstad
  • Frank Packer

Abstract

The three major credit rating agencies have reassessed sovereign credit risks in the light of the Great Financial Crisis, increasing the transparency of their methodologies. This has resulted in material shifts in the rank-ordering of risks. Simple statistical models explain the lion's share of ratings differentials and capture some, but not all, of the methodological changes. Support is not found for the hypothesis of bias against emerging market economies (EMEs). Some rating agencies other than the big three offer alternative risk rankings that are more favourable to EMEs. However, these tend to be less closely aligned with the rankings provided by market prices and institutional investors.

Suggested Citation

  • Marlene Amstad & Frank Packer, 2015. "Sovereign ratings of advanced and emerging economies after the crisis," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:1512h
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    References listed on IDEAS

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    1. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 599-646.
    2. Mr. John Kiff & Sylwia Nowak & Miss Liliana B Schumacher, 2012. "Are Rating Agencies Powerful? An Investigation Into the Impact and Accuracy of Sovereign Ratings," IMF Working Papers 2012/023, International Monetary Fund.
    3. Hill, Paula & Brooks, Robert & Faff, Robert, 2010. "Variations in sovereign credit quality assessments across rating agencies," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1327-1343, June.
    4. Claudio Borio & Frank Packer, 2004. "Assessing new perspectives on country risk," BIS Quarterly Review, Bank for International Settlements, December.
    5. Christian Dembiermont & Michela Scatigna & Robert Szemere & Bruno Tissot, 2015. "A new database on general government debt," BIS Quarterly Review, Bank for International Settlements, September.
    6. Frank Packer & Nikola Tarashev, 2011. "Rating methodologies for banks," BIS Quarterly Review, Bank for International Settlements, June.
    7. Flandreau, Marc & Gaillard, Norbert & Packer, Frank, 2011. "To err is human: US rating agencies and the interwar foreign government debt crisis," European Review of Economic History, Cambridge University Press, vol. 15(3), pages 495-538, December.
    8. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, vol. 2(Oct), pages 37-53.
    9. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 599-646.
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