To Err is Human: US Rating Agencies and the Interwar Foreign Government Debt Crisis

2010 ◽  
Author(s):  
Marc Flandreau ◽  
Norbert Gaillard ◽  
Frank Packer
Keyword(s):  
Debt Crisis ◽  
Government Debt ◽  
Rating Agencies ◽  
Foreign Government

scholarly journals The Role of Credit Rating Agencies in Sovereign Debt Markets

2018 ◽  
pp. 146-166
Author(s):  
Aline Darbellay
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Credit Ratings ◽  
Credit Rating Agencies ◽  
Past Century ◽  
The European Union ◽  
Rating Agencies ◽  
Sovereign Credit Ratings

Since the global financial crisis of 2007-2009, the leading credit rating agencies (CRAs) have faced an increasing level of legal and regulatory scrutiny in the United States (US) and in the European Union (EU). This chapter sheds light on the promise and perils of sovereign credit ratings in the light of the European sovereign debt crisis. The leading CRAs have been blamed for providing investors with inaccurate credit ratings, facing inappropriate incentives and lack of oversight. This chapter addresses the evolving function performed by CRAs over the past century. Traditionally, CRAs are private market actors assessing the creditworthiness of borrowers and debt instruments. Since the first sovereign bond ratings assigned in 1918, the rating business has grown in size and importance. Sovereign ratings supposedly predict financial distress of governments. Their role has shifted over the last four decades. Although they have repeatedly been blamed for being poor predictors of sovereign debt crises, CRAs continue to play a key role in modern capital markets.

scholarly journals A Discussion on the European Debt Crisis by Fiscal Sociology

2013 ◽  
Vol 2 (4) ◽  
pp. 37-48
Author(s):  
Chia-Jen Chang ◽  
Chia-Jung Chung
Keyword(s):  
Economic Theory ◽  
Labor Market ◽  
International Business ◽  
Debt Crisis ◽  
Government Debt ◽  
Fiscal Sociology ◽  
Neoclassical Economic Theory ◽  
European Debt Crisis ◽  
The Government ◽  
Austerity Policy

The purpose of this article is that discuss the reasons of European debt crisis. Every European country adopts austerity policy, which cannot solve government debt problems and further lead to economic exacerbation and continuous recession, based on the neoclassical economic theory. In order to realize the root of European debt crisis, this article adopts the reaseach method of fiscal sociology. In this study, we think that the government debt problem is the result of economic profits conflict based on the Fiscal Sociology. The economic profits conflict of investment, consumption, international business and labor market will have influence on the government’s revenue and expenditure. Furthermore, the root of the European debt crisis is the uneven income distribution by financialization and neoliberalism.

scholarly journals Rating Agencies, Self-Fulfilling Prophecy and Multiple Equilibria? An Empirical Model of the European Sovereign Debt Crisis 2009-2011

2017 ◽  
Vol 7 (1) ◽  
pp. 199 ◽  
Author(s):  
Manfred Gartner ◽  
Bjorn Griesbach
Keyword(s):  
Interest Rates ◽  
Sovereign Debt ◽  
Multiple Equilibria ◽  
Rating Scale ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Coefficient Estimates ◽  
Macroeconomic Variables ◽  
Rating Agencies ◽  
European Sovereign Debt Crisis

We explore whether governments may have faced scenarios of self-fulfilling prophecy and multiple equilibria during Europe’s sovereign debt crisis. To this end, we estimate the effect of interest rates and other macroeconomic variables on sovereign debt ratings, and of ratings on interest rates. We detect a nonlinear effect of ratings on interest rates which is strong enough to permit multiple equilibria. The good equilibrium is stable, ratings are excellent and interest rates are low. A second unstable equilibrium marks a threshold beyond which the country slides towards an insolvency trap. Coefficient estimates suggest that countries should stay well within the A segment of the rating scale in order to remain safe from being driven towards default.

Government Debt

2019 ◽  
pp. 81-94
Author(s):  
Keith Pareti ◽  
Rob Kennedy
Keyword(s):  
Financial Crisis ◽  
Gross Domestic Product ◽  
Sovereign Debt ◽  
Investment Decisions ◽  
Government Debt ◽  
Rating Agencies ◽  
Product Ratio ◽  
Default Rates ◽  
The U.S

This chapter focuses on the origin and functionality of U.S. government debt (Treasuries). Debt in the U.S. has been increasing for many decades, especially since the financial crisis of 2007–2008. The types of debt securities are discussed along with the auction process to obtain these investment vehicles. All investments involve risks and rating agencies attempt to rank and grade the risk associated with sovereign debt. Default rates, derivative contracts, and risk are important in making investment decisions with government debt. Investors could range from long-term investors, short-term speculators, and others. This chapter concludes with the outlook into the future and the historic high debt-to-gross-domestic product ratio.

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