Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088348 | Journal of Banking & Finance | 2016 | 11 Pages |
Abstract
A country's economic growth exhibits a significant response to sovereign rating changes: a one-notch upgrade (downgrade) causes an increase (decline) of about 0.6% (0.3%) in re-rated countries' five-year average annual growth rates. The results hold after accounting for other determinants of economic growth and potential endogeneity problems, and are robust to the use of quarterly data. Changes in country rating affect economic growth via the interest-rate and capital-flow channels: narrower sovereign bond yield spreads and increased capital inflows are associated with upgrades, which stimulate re-rated countries' economic performance, and the converse holds for downgrades.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sheng-Syan Chen, Hsien-Yi Chen, Chong-Chuo Chang, Shu-Ling Yang,