Quantitative Easing and Credit Rating Agencies

93 Pages Posted: 15 Jun 2022

See all articles by Nordine Abidi

Nordine Abidi

International Monetary Fund (IMF)

Matteo Falagiarda

European Central Bank (ECB)

Ixart Miquel-Flores

European Central Bank (ECB); Frankfurt School of Finance & Mangement.

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2022

Abstract

This paper investigates the behaviour of credit rating agencies using a natural experiment in monetary policy. We exploit the corporate QE of the Eurosystem and its rating-based specific design which generates exogenous variation in the probability for a bond of becoming eligible for outright purchases. We show that after the launch of the policy, rating activity was concentrated precisely on the territory where the incentives of market participants are expected to be more sensitive to the policy design. Our findings contribute to better assessing the consequences of the explicit reliance on CRAs ratings by central banks when designing monetary policy. They also support the Covid-19 monetary stimulus, and in particular the waiver of private credit rating eligibility requirements applied to recently downgraded issuers.

Keywords: Credit Rating Agencies, Monetary Policy, Quantitative Easing, eligibility requirement, rating activity, behaviour of credit rating agencies, rating Agency Disclaimer, eligibility frontier, Bonds, Bond ratings, Corporate bonds, Credit ratings, Unconventional monetary policies, Global, Middle East and Central Asia

JEL Classification: E44, E52, E58, G24, G30, G10, E50, G21

Suggested Citation

Abidi, Nordine and Falagiarda, Matteo and Miquel-Flores, Ixart, Quantitative Easing and Credit Rating Agencies (June 1, 2022). IMF Working Paper No. 2022/113, Available at SSRN: https://ssrn.com/abstract=4137206

Nordine Abidi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Matteo Falagiarda

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ixart Miquel-Flores

European Central Bank (ECB) ( email )

Sonnemannstraße 20
Frankfurt am Main, 60325
Germany

Frankfurt School of Finance & Mangement. ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
43
Abstract Views
220
PlumX Metrics