Credit rating agency announcements and the eurozone sovereign debt crisis

Arbeitspapier

This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade announcements negatively affected the value of the Euro currency and also increased its volatility. Downgrading increased the yields of French, Italian and Spanish bonds but lowered the German bond's yields, although Germany's rating status was never touched by CRA. There is no evidence for Granger causality from bond yields to rating announcements. We infer from these findings that CRA announcements significantly influenced crisis-time capital allocation in the Eurozone. Their downgradings caused investors to rebalance their portfolios across member countries, out of ailing states' debt into more stable borrowers' securities.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: DIW Discussion Papers ; No. 1333

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Financial Crises ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy ; Foreign Exchange ; International Policy Coordination and Transmission ; Economic Impacts of Globalization: Finance
• Thema: Credit Rating Agencies ; Euro Crisis ; Sovereign Debt ; Euro Exchange Rate

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Baum, Christopher F. ; Karpava, Margarita ; Schäfer, Dorothea ; Stephan, Andreas
• Ereignis: Veröffentlichung
• (wer): Deutsches Institut für Wirtschaftsforschung (DIW)
• (wo): Berlin
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/88151
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ