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Intereconomics

, Volume 33, Issue 2, pp 73–82 | Cite as

Sovereign credit ratings, emerging market risk and financial market volatility

  • Helmut Reisen
  • Julia von Maltzan
Credit Rating Agencies

Abstract

This article presents event studies that find a significant effect on dollar bond yield spreads when rating agencies put emerging-market sovereign bonds on review with negative outlook. The finding has two conditional implications. If rating agencies can be turned from late into early warning signals, they would have the potential to dampen boom-bust cycles in emerging-market flows. If rating agencies cannot improve on their reactive approach witnessed in the run-up and aftermath of recent currency crises, regulation and guidelines stipulating a certain rating status for institutional investment will continue to intensify boom-bust cycles. The paper concludes with regulatory suggestions for both outcomes.

Keywords

Yield Spread Stock Market Return Credit Rate Agency Sovereign Bond International Finance Corporation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© HWWA and Springer-Verlag 1998

Authors and Affiliations

  • Helmut Reisen
    • 1
  • Julia von Maltzan
    • 1
  1. 1.OECD Development CentreParisFrance

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