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Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt CrisisRabah ArezkiInternational Monetary Fund (IMF) Bertrand CandelonUniversity of Maastricht - Department of Economics Amadou Nicolas Racine SyInternational Monetary Fund (IMF) - International Capital Markets Department April 13, 2011 CESifo Working Paper Series No. 3411 Abstract: This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets. The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects. Rating-based triggers may help explain these results.
Number of Pages in PDF File: 29 Keywords: credit ratings, news, spillovers, financial markets JEL Classification: G150, F360 working papers seriesDate posted: April 19, 2011Suggested CitationContact Information
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