Credit Ratings and Debt Crises

45 Pages Posted: 11 Sep 2012

See all articles by Matthieu Bussière

Matthieu Bussière

Banque de France

Annukka Ristiniemi

Sveriges Riksbank; Paris School of Economics (PSE)

Date Written: September 1, 2012


This paper analyses the role of credit rating agencies in sovereign debt crises. Using a panel of 53 emerging and developing countries with annual data going back to 1977, the paper shows that credit ratings are not very good predictors of debt distress events once tested against a simple benchmark model with standard macroeconomic variables. Next, the paper turns to higher frequency data for a subset of countries to analyze the link between credit ratings and bond spreads. The results indicate that bond spreads react strongly to credit ratings, especially to downgrades in the non-investment grade category. The results are robust to a variety of additional tests.

Keywords: Credit rating agencies, debt crises, fiscal policy, emerging market economies, developing countries, panel estimation

JEL Classification: E60, C33, C35

Suggested Citation

Bussiere, Matthieu and Ristiniemi, Annukka, Credit Ratings and Debt Crises (September 1, 2012). Banque de France Working Paper No. 396, Available at SSRN: or

Matthieu Bussiere (Contact Author)

Banque de France ( email )


Annukka Ristiniemi

Sveriges Riksbank ( email )

SE-103 37 Stockholm

HOME PAGE: http://www.ristiniemi.con

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics