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Assessment of the Impact of Trade Partner’s Cross-Country Sovereign Rating on the Financial Market of Selected Emerging Market Economies

Author

Listed:
  • Hesam Aldin SHAHRIVAR

    (Eastern Mediterranean University, Faculty of Business and Economics, Department of Economics)

  • Nwin Anefo Fru ASABA

    (Eastern Mediterranean University, Faculty of Business and Economics, Department of Economics)

Abstract

In recent years, credit rating agencies such as Moody’s, S&P and Fitch either upgraded or downgraded countries when their economies were either blossoming or in a chaotic state. There is general consensus that credit rating agencies’ actions have triggered substantial financial unrestrained behaviour that resulted to the recent financial meltdown in 2008. To what extent does a sovereign ratings upgrade or downgrade of the major trade partners of an emerging market economy impact trade both domestically and internationally? This research is done using data from 10 emerging countries between 2000-2011to investigate the cross-country impact of either an upgrade or downgrade of an emerging economy’s principal trade partners on its financial market. In addition we analyse the impact prior and after the 2008 financial crisis. The ramifying impact on emerging economies due to sovereign grade change given a 10 days event window prior and after the event is investigated. We use both a pooled panel framework and event study methodology to assess the significance of the effect of rating changes.

Suggested Citation

  • Hesam Aldin SHAHRIVAR & Nwin Anefo Fru ASABA, 2013. "Assessment of the Impact of Trade Partner’s Cross-Country Sovereign Rating on the Financial Market of Selected Emerging Market Economies," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 13(2), pages 137-150.
    • Handle: RePEc:ege:journl:v:13:y:2013:i:2:p:137-150
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    References listed on IDEAS

    as
    1. Constantin Mellios & Eric Paget-Blanc, 2006. "Which factors determine sovereign credit ratings?," The European Journal of Finance, Taylor & Francis Journals, vol. 12(4), pages 361-377.
    2. Anthony Richards & David Deddouche, 2003. "Bank Rating Changes and Bank Stock Returns: Puzzling Evidence from the Emerging Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 2(3), pages 337-363, September.
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    More about this item

    Keywords

    Contagion; emerging markets; event study; financial markets; pooled panel; sovereign credit rating;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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