Abstract

Abstract:

In this study, we examine the history of sovereign credit ratings in Latin America and the Caribbean, the evolution of credit quality, and the relationship between rating changes and the cost of accessing external financing as reflected in the behavior of sovereign bond spreads. We apply an event study to estimate the impact of credit rating changes on sovereign bond spreads in the past fifteen years. We find that the impact is asymmetric (with a larger impact for downgrades) and is sensitive to both spatial and temporal clustering. The results suggest that the quality of sovereign credit is important in determining the cost of access to private external financing.

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Additional Information

ISSN
1533-6239
Print ISSN
1529-7470
Pages
pp. 155-196
Launched on MUSE
2019-12-16
Open Access
No
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