Credit Rating and Debt Crises

Holden, Steinar; Natvik, Gisle James; Vigier, Adrien

Abstract

We develop an equilibrium theory of credit rating in the presence of rollover risk. By influencing rational creditors, ratings affect sovereigns' probability of default, which in turn affects ratings. Our analysis reveals a pro-cyclical impact of credit rating: In equilibrium the presence of a rating agency increases default risk when it is high and decreases default risk when it is low.

Citation

Holden, S., Natvik, G. J., & Vigier, A. (2018). Credit Rating and Debt Crises. International Economic Review, 59(2), 973-987. https://doi.org/10.1111/iere.12293

• Journal Article Type: Article
• Acceptance Date: Apr 26, 2017
• Online Publication Date: Apr 10, 2018
• Publication Date: May 17, 2018
• Deposit Date: Sep 23, 2020
• Publicly Available Date: Sep 23, 2020
• Journal: International Economic Review
• Print ISSN: 0020-6598
• Electronic ISSN: 1468-2354
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 59
• Issue: 2
• Pages: 973-987
• DOI: https://doi.org/10.1111/iere.12293
• Keywords: Economics and Econometrics
• Public URL: https://nottingham-repository.worktribe.com/output/4921032
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/iere.12293
• Additional Information: This is the peer reviewed version of the following article: Holden, S., Natvik, G.J. and Vigier, A. (2018), CREDIT RATING AND DEBT CRISES. International Economic Review, 59: 973-987, which has been published in final form at https://onlinelibrary.wiley.com/doi/full/10.1111/iere.12293. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.