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The role of rating agencies in the Eurozone sovereign debt crisis
Type
applied research project
Start Date
01 October 2010
End Date
31 July 2014
Status
ongoing
Keywords
rating agencies
sovereign debt
crisis
multiple equilibria
self-fulfilling prophecy
interest rates
spreads
budget deficit
Description
The project attempts to provide an empirical understanding of the role of rating agencies in sovereign debt crises in general, and in the Eurozone's sovereign debt crisis in particular. It looks both at what determines sovereign bond ratings, and at the effects of rating changes. From a macroeconomic perspective we try to find out whether Europe faced a scenario of multiple equilibria and self-fulfilling prophecy, and how rating agencies affected the dynamics within such a system.
Leader contributor(s)
Member contributor(s)
Funder(s)
Topic(s)
rating agencies
models of sovereign debt crises
Method(s)
theoretical analysis
statistical and narrative empirics
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
212380
40 results
Now showing
1 - 10 of 40
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PublicationPIGS or Lambs? The European Sovereign Debt Crisis and the Role of Rating Agencies(School of Economics and Political Science, 2011-03-28)This 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 equ-ations to decompose actual ratings into systematic and arbitrary components that are not explained by observed previous procedures of rating agencies. Next, we check whether both systematic and arbitrary parts of credit ratings affect credit spreads. We find that both do, which opens the possibility that arbitrary rating downgrades trigger processes of self-fulfilling prophecy that may drive even relatively healthy countries towards default. [http://ideas.repec.org/p/usg/econwp/201106.html#abstract Volltext herunterladen]
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PublicationType: newspaper articleJournal: Süddeutsche ZeitungVolume: 2011Issue: nicht bekannt
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PublicationType: presentation
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PublicationScapegoat €? : Dokumentarfilm von Alexander Kockerbeck"The Euro crisis is not over! We have managed to calm financial markets, but the problem has moved into the social and political sphere, with increasing unemployment and the risk of growing extremism and euro scepticism", says Paul De Grauwe from the London School of Economics, one of the top economists featured in this European documentary. Thomas Mayer, the former chief economist of Deutsche Bank, is concerned about the "centrally planned monetary economy" led by Central Banks which try to kickstart the economy and to fight deflation by creating unprecedented levels of liquidity that may compromise the entire monetary system. Manfred Gärtner from the University St. Gallen elaborates how the global financial crisis played havoc with European government finances and how problematic sovereign ratings may have added to a "bad equilibrium" in the whole euro area that forced the European Central Bank to do "whatever it takes" to defend the Euro. Alexander Kockerbeck
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PublicationType: newspaper articleJournal: Kleine ZeitungVolume: 109Issue: 200
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PublicationType: presentation