To Err is Human: Rating Agencies and the Interwar Foreign Government Debt Crisis

Flandreau, Marc; Gaillard, Norbert; Packer , Frank

To Err is Human: Rating Agencies and the Interwar Foreign Government Debt Crisis

BIS Working Paper No. 335

46 Pages Posted: 6 Jun 2011

See all articles by Marc Flandreau

Marc Flandreau

Centre for Economic Policy Research (CEPR)

Frank Packer

Bank for International Settlements (BIS)

There are 2 versions of this paper

Date Written: December 2010

Abstract

During the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we do not find that superior forecasting capacities can explain the agencies' growing importance.

Keywords: sovereign credit ratings, Great Depression, financial crisis, international bond markets

JEL Classification: E44, F34, G15, N20

Suggested Citation: Suggested Citation

Flandreau, Marc and Gaillard, Norbert and Packer, Frank, To Err is Human: Rating Agencies and the Interwar Foreign Government Debt Crisis (December 2010). BIS Working Paper No. 335. Available at SSRN: https://ssrn.com/abstract=1858565