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Björn Griesbach
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Griesbach
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Björn
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Item type:Publication, PIGS or Lambs? The European Sovereign Debt Crisis and the Role of Rating AgenciesThis paper asks whether rating agencies played a passive role or were an active driving force during Europe's sovereign debt crisis. We address this by estimating relationships between sovereign debt ratings and macroeconomic and structural variables. We then use these equations to decompose actual ratings into systematic and arbitrary components that are not explained by previously observed procedures of rating agencies. Finally, we check whether systematic, as well as arbitrary, parts of credit ratings affect credit spreads. We find that both do affect credit spreads, which opens the possibility that arbitrary rating downgrades trigger processes of self-fulfilling prophecies that may drive even relatively healthy countries towards default. (A Working Paper Version is available at [http://ideas.repec.org/p/usg/econwp/201106.html http://ideas.repec.org/p/usg/econwp/201106.html])Type:journal articleJournal:International Advances in Economic ResearchVolume:17Issue:3Scopus© Citations 76 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Rating agencies, self-fulfilling prophecy and multiple equilibria? : An empirical model of the European sovereign debt crisis 2009-2011We explore whether experiences during Europe's sovereign debt crisis support the notion that governments faced scenarios of self-fulfilling prophecy and multiple equilibria. To this end, we provide estimates of the effect of interest rates and other macroeconomic variables on sovereign debt ratings, and estimates of how ratings bear on interest rates. We detect a nonlinear effect of ratings on interest rates which is strong enough to generate multiple equilibria. The good equilibrium is stable, ratings are excellent and interest rates are low. A second unstable equilibrium marks a threshold beyond which the country falls into an insolvency trap from which it may only escape by exogenous intervention. Coefficient estimates suggest that countries should stay well within the A section of the rating scale in order to remain reasonably safe from being driven into eventual default. [http://ideas.repec.org/p/usg/econwp/201215.html Volltext herunterladen]Type:discussion paperIssue:2012-15