Foreign Currency Credit Ratings for Emerging Market Economies

Author/Editor:

Roberto Perrelli ; Christian B. Mulder

Publication Date:

December 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines how ratings for emerging market economies have been set. Given the high degree of autocorrelation in ratings, we use estimators that yield consistent parameters in the presence of such correlation. The results show that rating changes for emerging market economies have been dominated by variables different from those suggested by the literature. We also conclude that some deterioration in the ratings was warranted during the recent crisis episodes in view of the behavior of economic fundamentals, but that the agencies overreacted for several key countries. We find evidence of a structural break: since the Asian crisis period, ratings have been influenced by reserves in relation to short-term debt.

Series:

Working Paper No. 2001/191

Subject:

Asset and liability management Credit ratings Debt rescheduling Emerging and frontier financial markets Financial crises Financial markets Inflation Money Prices

English

Publication Date:

December 1, 2001

ISBN/ISSN:

9781451859713/1018-5941

Stock No:

WPIEA1912001

Pages:

23

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