Do Ratings Matter?

The role of Credit Rating Agencies has come to the forefront of the policy debate in recent months. The sudden collapse of complex structured financial instruments that were once categorized as safe “investment grade” products has cast doubts on the way rating agencies do their business, the structure of incentives they face, and the appropriateness of the existing regulatory framework and surveillance mechanisms.


The recent credit turmoil has had to date only relatively subdued effects on Latin American markets1. While there were some effects largely as a result of rising risk aversion with a larger impact on emerging country assets with lower credit ratings, the region appears to have escaped relatively lightly. We have not seen the liquidity-driven […]

Spreads and Ratings (a postscript)

The analysis in our original paper that I commented on in the blog (Spreads and Ratings July 26th) used data to the end of 2006. However, as many readers have commented emerging markets spreads have risen. In this Postscript I present some additional results including an analysis of what might happen to EM spreads if […]

Spreads and Ratings

Ratings are up, spreads are down. Chart 1 plots cumulative upgrades for Moody’s and S&P for Emerging Markets (EM’s) and the EMBI global illustrating the dramatic increase in emerging market credit quality the reduction in emerging market spreads[1]. In this blog I want to address 3 issues:   Chart 1: Cumulative Upgrades and The EMBI […]