Download This PaperCredit Rating and Debt Crises
15 Pages Posted: 22 May 2020
Date Written: May 2018
Abstract
We develop an equilibrium theory of credit rating in the presence of rollover risk. By influencing rational creditors, ratings affect sovereigns' probability of default, which in turn affects ratings. Our analysis reveals a pro‐cyclical impact of credit rating: In equilibrium the presence of a rating agency increases default risk when it is high and decreases default risk when it is low.
Suggested Citation: Suggested Citation
Holden, Steinar and Natvik, Gisle James and Vigier, Adrien, Credit Rating and Debt Crises (May 2018). International Economic Review, Vol. 59, Issue 2, pp. 973-987, 2018, Available at SSRN: https://ssrn.com/abstract=3602066 or http://dx.doi.org/10.1111/iere.12293
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