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Rating the Rating Agencies: Anticipating Currency Crises or Debt Crises

Author/Editor: Sy, Amadou N. R.
Authorized for Distribution: June 1, 2003
Electronic Access: Free Full Text (PDF file size is 918KB)
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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: In contrast to the early-warning system literature, we find that currency and debt crises are not closely linked in emerging markets. We find that after 1994, credit ratings predict debt crises but fail to anticipate currency crises. When debt crises are defined as sovereign distress-when spreads are higher than 1,000 basis points-we find that countries experience reduced capital market access and high interest rates on their external debt for typically more than two quarters. We also find that lagged ratings and ratings changes, including negative outlooks and credit watches, anticipate such debt crises.
 
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Series: Working Paper No. 03/122
Subject(s): Debt | Financial crisis | Bonds
Author's keyword(s): Crises | default | distress | early warning systems | probability of default | ratings
 
English  
    Published:   June 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1222003   Pages:   25
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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