To Judge Leviathan: Sovereign Credit Ratings, National Law, and the World Economy

Journal of Public Policy, Vol. 25, No. 2, pp. 191-217, August 2005

27 Pages Posted: 19 Mar 2008

See all articles by Christopher M. Bruner

Christopher M. Bruner

University of Georgia School of Law

Rawi Abdelal

Harvard University - Business, Government and the International Economy Unit

Abstract

Recent decades have witnessed the remarkable rise of a kind of market authority almost as centralized as the state itself - two credit rating agencies, Moody's and Standard and Poor's. These agencies derive their influence from two sources. The first is the information content of their ratings. The second is both more profound and vastly more problematic: ratings are incorporated into financial regulations in the United States and around the world. In this article we clarify the role of credit rating agencies in global capital markets, describe the host of problems that arise when their ratings are given the force of the law, and outline the alternatives to the public policy dilemmas created when ratings receive a public imprimatur. We conclude that agencies designated for regulatory purposes should be required to provide more nuanced ratings exposing their perceptual and ideological underpinnings (especially for sovereigns), and facilitating consideration of alternatives to ratings-dependent regulation.

Suggested Citation

Bruner, Christopher M. and Abdelal, Rawi, To Judge Leviathan: Sovereign Credit Ratings, National Law, and the World Economy. Journal of Public Policy, Vol. 25, No. 2, pp. 191-217, August 2005. Available at SSRN: https://ssrn.com/abstract=1109075

Christopher M. Bruner

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States

Rawi Abdelal (Contact Author)

Harvard University - Business, Government and the International Economy Unit ( email )

Morgan Hall 287
Harvard Business School
Boston, MA 02163
United States

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