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Effect of the Sovereign Credit Ratings in East Asia Countries: Evidence from Panel Vector Autoregression

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  • Sammo Kang
  • Sejin Min

Abstract

We study the effect of the sovereign credit ratings on the economies of seven East Asian countries, applying panel vector autoregression (VAR). We find that rating has less effect than outlook of rating on the credit default swap (CDS) spreads, the stock indexes, and the GDP growth rates. Rating upgrade and positive outlook have stronger effects than rating downgrade and negative outlook, and the effects of positive outlook and rating are greater after the financial crisis. There is evidence of contagion in that the economic variables of a country seem to have been affected by the outlooks of the other countries.

Suggested Citation

  • Sammo Kang & Sejin Min, 2016. "Effect of the Sovereign Credit Ratings in East Asia Countries: Evidence from Panel Vector Autoregression," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(5), pages 1121-1144, May.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:5:p:1121-1144
    DOI: 10.1080/1540496X.2015.1103122
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    Cited by:

    1. Kenourgios, Dimitrios & Umar, Zaghum & Lemonidi, Paraskevi, 2020. "On the effect of credit rating announcements on sovereign bonds: International evidence," International Economics, Elsevier, vol. 163(C), pages 58-71.
    2. Bales, Kyle & Malikane, Christopher, 2020. "The effect of credit ratings on emerging market volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    3. Qureshi, Fiza & Kutan, Ali M. & Ismail, Izlin & Gee, Chan Sok, 2017. "Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 176-192.

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