scholarly journals Feeling the Heat

2020 ◽  
Vol 20 (286) ◽  
Author(s):  
Serhan Cevik ◽  
João Tovar Jalles
Keyword(s):  
Climate Change ◽  
Credit Ratings ◽  
Impact Of Climate Change ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
Binary Choice Models ◽  
Macroeconomic Determinants ◽  
Credit Worthiness ◽  
The Impact ◽  
Climate Change Resilience

Climate change is an existential threat to the world economy like no other, with complex, evolving and nonlinear dynamics that remain a source of great uncertainty. There is a bourgeoning literature on the economic impact of climate change, but research on how climate change affects sovereign risks is limited. Building on our previous research focusing on the impact of climate change on sovereign risks, this paper empirically investigates how climate change may affect sovereign credit ratings. By means of binary-choice models, we find that climate change vulnerability has adverse effects on sovereign credit ratings, after controlling for conventional macroeconomic determinants of credit worthiness. On the other hand, with regards to climate change resilience, we find that countries with greater climate change resilience benefit from higher (better) credit ratings. These findings, robust to a battery of sensitivity checks, also show that impact of climate change is disproportionately greater in developing countries due largely to weaker capacity to adapt to and mitigate the consequences of climate change.

Sovereign credit ratings, relative risk ratings and private capital flows: evidence from emerging and frontier markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Supriyo De ◽  
Sanket Mohapatra ◽  
Dilip Ratha
Keyword(s):  
Relative Risk ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Private Capital ◽  
Content Type ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
Private Capital Flows ◽  
The Impact

Purpose Relative risk ratings measure the degree by which a country’s sovereign rating is better or worse than other countries (Basu et al., 2013). However, the literature on the impacts of sovereign ratings on capital flows has not covered the role of relative risk ratings. This paper aims to examine the effect of relative risk ratings on private capital flows to emerging and frontier market economies is filled. In the analysis, the effect of relative risk ratings to that of absolute sovereign ratings in influencing private capital flows are compared. Design/methodology/approach This paper examines the influence of sovereign credit ratings and relative risk ratings on private capital flows to 26 emerging and frontier market economies using quarterly data for a 20-year period between 1998 and 2017. A dynamic panel regression model is used to estimate the relationship between ratings and capital flows after controlling for other factors that can influence capital flows such as growth and interest rate differentials and global risk conditions. Findings The analysis finds that while absolute sovereign credit ratings were an important determinant of net capital inflows prior to the global financial crisis in 2008, the influence of relative risk ratings increased in the post-crisis period. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. The main results are robust to an alternate measure of capital flows (gross capital flows instead of net capital flows), to the use of fixed gross domestic product weights in calculating relative risk ratings and to the potential endogeneity of absolute and relative ratings. Originality/value This study advances the literature on being the first attempt to understand the impact of relative risk ratings on capital flows and also comparing the impact of absolute sovereign ratings and relative risk ratings on capital flows in the pre- and post-global financial crisis periods. The findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings.

scholarly journals Sovereign credit ratings and CDS spreads in Emerging Europe

Equilibrium ◽  
2020 ◽  
Vol 15 (3) ◽  
pp. 419-438
Author(s):  
Łukasz Dopierała ◽  
Daria Ilczuk ◽  
Liwiusz Wojciechowski
Keyword(s):  
Financial Markets ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Value Added ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
The Impact

Research background: Sovereign credit ratings play an important role in determining any country’s access to the international debt market. During the global financial crisis and the European debt crisis, credit rating agencies were harshly criticized for the timing of their announcements regarding ratings downgrades and the ranges of those downgrades. Therefore, it is worth considering whether the sovereign credit rating is still a useful benchmark for investors. Purpose of the article: This article examines whether credit rating agencies still provide financial markets with new information about the solvency of governments in Emerging Europe countries. In addition, it describes the differences in the effect of particular types of rating events on financial markets and the impact of individual agencies on the market situation. Our study also focuses on evaluating these occurrences at different stages of the business cycle. Methods: This article uses data about ratings events that took place between 2008 and 2018 in 17 Emerging Europe economies. We took into consideration positive, neutral, and negative events related to ratings changes and the outlooks reported by Fitch Ratings, Moody’s, and Standard & Poor’s. We used a methodology based on event studies. In addition, we performed Wilcoxon signed-ranks test and used a logit model to determine the usefulness of cumulative adjusted credit default swap (CDS) spread changes in predicting the direction of ratings changes. Findings & Value added: Our research provides evidence that the CDS market reflects information regarding government issuers up to three months before ratings downgrades are announced. Information reported to the market by ratings agencies is only relevant in the short timeframe surrounding ratings downgrades and upgrades. However, positive credit rating changes convey more information to the market. We also found strong evidence that, in the post-crisis period, credit ratings provide markets with less information.

The impact of sovereign credit ratings on corporate credit ratings in South Africa

2017 ◽  
Vol 8 (2) ◽  
pp. 126-146 ◽  
Author(s):  
Zuziwe Ntsalaze ◽  
Gideon Boako ◽  
Paul Alagidede
Keyword(s):  
South Africa ◽  
Fixed Effects ◽  
Credit Ratings ◽  
Generalized Method Of Moments ◽  
The Body ◽  
Content Type ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of sovereign credit ratings on corporations in South Africa by assessing whether the sovereign rating assigned to South Africa by credit rating agencies acts as a ceiling/constraint for credit ratings assigned to corporations that operate within the country. The question of whether sovereign ratings are significant in determining corporate ratings was also explored. Design/methodology/approach To test the hypothesis regarding the rating of corporates relative to sovereigns, a longitudinal panel design was followed. The analysis employed fixed effects and generalized method of moments techniques. Findings The main findings are that sovereign ratings both act as a ceiling for corporate ratings and are important determinants of corporate ratings in South Africa. The findings however indicated that company specific variables (accounting variables) are not significant in explaining credit risk ratings assigned to corporates. Research limitations/implications This study only looked at the rating activity done by Standard and Poor’s (S&P). A possible further study could explore the hypothesis tested in this research using data from multiple rating agencies and contrast the results across different agencies. Future studies could also look at crisis periods and how the transfer risk discussed in this paper manifests during the transfer period. Practical implications The results have implications for the borrowing costs incurred by corporates in South Africa when participating in the international debt market. The implication is that if the sovereign is poorly rated, the corporates may be limited in their ability to secure investor funding at competitive rates from the international financial markets. Thus, should South Africa be downgraded to non-investment grade by S&P, the implications may be that South African corporates on average may suffer the same fate. Originality/value Extant literature predominantly utilizes foreign currency ratings. To the extent that this study uses local currency ratings, it adds a new dimension in the body of related studies.

HOW CLIMATE CHANGE CAN INFLUENCE THE AGRICULTURE IN UKRAINE: A REVIEW

2020 ◽  
Author(s):  
N. Maidanovych ◽  
Keyword(s):  
Climate Change ◽  
Crop Yields ◽  
Soil Surface ◽  
Winter Period ◽  
Negative Consequences ◽  
Resource Saving ◽  
Impact Of Climate Change ◽  
Positive Effects ◽  
Average Annual Temperature ◽  
The Impact

The purpose of this work is to review and analyze the main results of modern research on the impact of climate change on the agro-sphere of Ukraine. Results. Analysis of research has shown that the effects of climate change on the agro-sphere are already being felt today and will continue in the future. The observed climate changes in recent decades have already significantly affected the shift in the northern direction of all agro-climatic zones of Europe, including Ukraine. From the point of view of productivity of the agro-sphere of Ukraine, climate change will have both positive and negative consequences. The positives include: improving the conditions of formation and reducing the harvesting time of crop yields; the possibility of effective introduction of late varieties (hybrids), which require more thermal resources; improving the conditions for overwintering crops; increase the efficiency of fertilizer application. Model estimates of the impact of climate change on wheat yields in Ukraine mainly indicate the positive effects of global warming on yields in the medium term, but with an increase in the average annual temperature by 2 ° C above normal, grain yields are expected to decrease. The negative consequences of the impact of climate change on the agrosphere include: increased drought during the growing season; acceleration of humus decomposition in soils; deterioration of soil moisture in the southern regions; deterioration of grain quality and failure to ensure full vernalization of grain; increase in the number of pests, the spread of pathogens of plants and weeds due to favorable conditions for their overwintering; increase in wind and water erosion of the soil caused by an increase in droughts and extreme rainfall; increasing risks of freezing of winter crops due to lack of stable snow cover. Conclusions. Resource-saving agricultural technologies are of particular importance in the context of climate change. They include technologies such as no-till, strip-till, ridge-till, which make it possible to partially store and accumulate mulch on the soil surface, reduce the speed of the surface layer of air and contribute to better preservation of moisture accumulated during the autumn-winter period. And in determining the most effective ways and mechanisms to reduce weather risks for Ukrainian farmers, it is necessary to take into account the world practice of climate-smart technologies.

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