Sovereign Ratings of Advanced and Emerging Economies after the Crisis

15 Pages Posted: 8 Dec 2015

See all articles by Marlene Amstad

Marlene Amstad

Harvard Kennedy School; The Chinese University of Hong Kong, Shenzhen

Frank Packer

Bank for International Settlements (BIS)

Date Written: December 6, 2015

Abstract

The three major credit rating agencies have reassessed sovereign credit risks in the light of the Great Financial Crisis, increasing the transparency of their methodologies. This has resulted in material shifts in the rank-ordering of risks. Simple statistical models explain the lion's share of ratings differentials and capture some, but not all, of the methodological changes. Support is not found for the hypothesis of bias against emerging market economies (EMEs). Some rating agencies other than the big three offer alternative risk rankings that are more favourable to EMEs. However, these tend to be less closely aligned with the rankings provided by market prices and institutional investors.

JEL Classification: F34, G24, H63

Suggested Citation

Amstad, Marlene and Packer, Frank, Sovereign Ratings of Advanced and Emerging Economies after the Crisis (December 6, 2015). BIS Quarterly Review December 2015, Available at SSRN: https://ssrn.com/abstract=2700258

Marlene Amstad (Contact Author)

Harvard Kennedy School ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

The Chinese University of Hong Kong, Shenzhen ( email )

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
4161 280 8449 (Phone)

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