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The influence of credit rating agencies on the euro crisis

by Van Hiep Nguyen
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Current price ₹5,116.00
Original price ₹5,586.00
Original price ₹5,586.00
Original price ₹5,586.00
(-8%)
₹5,116.00
Current price ₹5,116.00

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Book cover type: Paperback
  • ISBN13: 9786209980718
  • Binding: Paperback
  • Subject: N/A
  • Publisher: Our Knowledge Publishing
  • Publisher Imprint: Our Knowledge Publishing
  • Publication Date:
  • Pages: 60
  • Original Price: USD 57.0
  • Language: English
  • Edition: N/A
  • Item Weight: 96 grams
  • BISAC Subject(s): Banks & Banking

This study examines the influence of credit rating agencies on the euro crisis, with a particular focus on the role of the GIPS countries. To this end, an agency's rating was broken down into three components. The subjective rating component had the greatest influence on the yield spreads of the countries, which had a direct impact on their cost of capital. All OECD countries included in the sample were rated significantly lower after the outbreak of the euro crisis than before the crisis, despite the economic situation remaining unchanged. Before the crisis began, the GIPS countries were still rated in the same way as the other countries. During the crisis, they were rated significantly lower for no apparent reason. If a country is downgraded by one notch, the yield spread on its government bonds rises by an average of just under half a percentage point. In the case of a GIPS country, the yield spread rises by 1.35 percentage points. Multiple equilibria, self-fulfilling prophecies and high contagion risks, caused by the rating agencies, exacerbated the euro crisis.

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