On the Self-Fulfilling Prophecy of Changes in Sovereign Ratings

We empirically investigate the dynamic interactions between sovereign ratings and the macroeconomic environment using a Panel VAR on annual data for European countries from 1996 to 2013. Our results provide evidence for a significcant two-way interaction between the macroeconomic environment and changes in sovereigns' ratings. Thus, rating changes are able to exacerbate a country's boom-bust cycle.

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Year of publication:	2014-01-06
Authors:	Schumacher, Ingmar
Institutions:	Institut de Préparation à l'Administration et à la Gestion (IPAG)
Subject:	sovereign ratings \| Panel VAR \| self-fulfilling prophecy

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number 2014-051 27 pages
Classification:	E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook ; C33 - Models with Panel Data
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010754778