Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis
International Monetary Fund (IMF)
University of Maastricht - Department of Economics
Amadou Nicolas Racine Sy
International Monetary Fund (IMF) - International Capital Markets Department
April 13, 2011
CESifo Working Paper Series No. 3411
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, F360working papers series
Date posted: April 19, 2011
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