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Revisiting sovereign ratings, capital flows and financial contagion in emerging markets

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  • Emara, Noha

Abstract

This study revisits sovereign credit ratings, contagion and capital flows to Emerging Markets (EMs), and clarify the relationship between them. Specifically, this study analyzes how the changes in sovereign rating influence different types of capital flows to EMs and whether the changes in the different kinds of capital flows in one country be explained by a sovereign ratings’ change in another country. Using Arellano-Bover/Blundell-Bond Dynamic Panel System GMM for 23 EMs over the period 1990-2012 the results of the study suggest that sovereign ratings is a crucial factor for EMs’ access to international capital markets and that capital flows is a major source of financing for Ems. In addition, the results show that financial contagion may continue to be a threat to capital flowing into EMs and that financial crisis increases the impact of sovereign rating on foreign direct investment but is not the case with portfolio investment.

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  • Emara, Noha, 2015. "Revisiting sovereign ratings, capital flows and financial contagion in emerging markets," MPRA Paper 68689, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68689
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    References listed on IDEAS

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    Cited by:

    1. Emara, Noha & El Said, Ayah, 2021. "Financial inclusion and economic growth: The role of governance in selected MENA countries," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 34-54.
    2. Noha Emara & Ayah El Said, 2021. "Sovereign ratings, foreign direct investment and contagion in emerging markets: Does being a BRICS country matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5217-5234, October.
    3. Emara, Noha & El Said, Aya, 2019. "Sovereign Ratings, Foreign Direct Investment, and Financial Contagion: The Case of Emerging Markets," MPRA Paper 94504, University Library of Munich, Germany.
    4. Emara, Noha & Zhang, Xiaojun & Liu, Shangchao, 2019. "Economic Growth and Financial Stability in MENA Countries: Does Exporting Oil Matters?," MPRA Paper 99312, University Library of Munich, Germany.
    5. Emara, Noha & KASA, Hicran, 2020. "The Non-Linear Relationship between Financial Access and Domestic Savings," MPRA Paper 99256, University Library of Munich, Germany.

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    More about this item

    Keywords

    Sovereign Rating; Capital Flows; System GMM; Foreign Direct Investment; Portfolio Investment;
    All these keywords.

    JEL classification:

    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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