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Credit Rating Agency Downgrades and the Eurozone Sovereign Debt Crises
Boston College.
MediaCom London.
Högskolan i Jönköping, Internationella Handelshögskolan, IHH, Nationalekonomi. DIW Berlin.
Högskolan i Jönköping, Internationella Handelshögskolan, IHH, Nationalekonomi. Högskolan i Jönköping, Internationella Handelshögskolan, IHH, Center for Family Enterprise and Ownership (CeFEO). DIW Berlin.ORCID-id: 0000-0001-5776-9396
2014 (engelsk)Rapport (Annet vitenskapelig)
Abstract [en]

This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011–2012. The employed GARCH models show that CRA downgrade announcements negatively affected the value of the Euro currency and also increased its volatility. Downgrading increased the yields of French, Italian and Spanish bonds but lowered the German bond’s yields, although Germany’s rating status was never touched by CRA. There is no evidence for Granger causality from bond yields to rating announcements. We infer from these findings that CRA announcements significantly influenced crisis-time capital allocation in the Eurozone. Their downgradings caused investors to rebalance their portfolios across member countries, out of ailing states’ debt into more stable borrowers’ securities.

sted, utgiver, år, opplag, sider
Berlin: DIW , 2014. , s. 34
Serie
Discussion Papers of DIW Berlin, ISSN 1619-4535 ; 1333
Emneord [en]
Credit Rating Agencies, Euro Crisis, Sovereign Debt, Euro Exchange Rate
HSV kategori
Identifikatorer
URN: urn:nbn:se:hj:diva-29333OAI: oai:DiVA.org:hj-29333DiVA, id: diva2:901820
Tilgjengelig fra: 2016-02-09 Laget: 2016-02-09 Sist oppdatert: 2025-10-13bibliografisk kontrollert

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