Rating the Rating Agencies: Anticipating Currency Crises or Debt Crises?

June 1, 2003

Preview Citation

Format: Chicago

Amadou N Sy. Rating the Rating Agencies: Anticipating Currency Crises or Debt Crises?, (USA: International Monetary Fund, 2003) accessed December 12, 2024

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.

Subject: Credit ratings, Currency crises, Debt default, Distressed assets, External debt, Financial crises, Financial sector policy and analysis, Money

Keywords: Africa, C rating category, Changes variable, Credit ratings, Crisis, Crisis indicator, Currency crises, Currency crises well, Currency crisis, Currency crisis dummy, Debt crisis, Debt default, Default, Distress, Distressed assets, Early-warning systems, Foreign currency, Probability of default, Rating agency, Rating bias, Ratings, Ratings change, Ratings index, Ratings variable, Sovereign rating, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/122
Stock No:

WPIEA1222003
ISBN:

9781451854510
ISSN:

1018-5941

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