Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows
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 1998-2017. A dynamic panel regression model is used to estimate...
| Main Authors: | , , |
|---|---|
| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/600951600350724639/Sovereign-Credit-Ratings-Relative-Risk-Ratings-and-Private-Capital-Flows http://hdl.handle.net/10986/34488 |
| id |
okr-10986-34488 |
|---|---|
| recordtype |
oai_dc |
| spelling |
okr-10986-344882022-09-20T00:10:04Z Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows De, Supriyo Mohapatra, Sanket Ratha, Dilip EMERGING MARKET ECONOMIES FRONTIER MARKETS CAPITAL FLOWS PRIVATE CAPITAL FLOWS SOVEREIGN CREDIT RATING DEBT MARKETS SOVEREIGN BOND MARKET 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 1998-2017. 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. The analysis finds that while absolute 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, which was characterized by easy monetary policies and global liquidity, on the one hand, and greater caution and discretion on the part of investors on the other. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. These findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings. Tracking changes in relative ratings could help predict macroeconomic disturbances resulting from volatile portfolio capital movements. 2020-09-18T14:23:26Z 2020-09-18T14:23:26Z 2020-09 Working Paper http://documents.worldbank.org/curated/en/600951600350724639/Sovereign-Credit-Ratings-Relative-Risk-Ratings-and-Private-Capital-Flows http://hdl.handle.net/10986/34488 English Policy Research Working Paper;No. 9401 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
EMERGING MARKET ECONOMIES FRONTIER MARKETS CAPITAL FLOWS PRIVATE CAPITAL FLOWS SOVEREIGN CREDIT RATING DEBT MARKETS SOVEREIGN BOND MARKET |
| spellingShingle |
EMERGING MARKET ECONOMIES FRONTIER MARKETS CAPITAL FLOWS PRIVATE CAPITAL FLOWS SOVEREIGN CREDIT RATING DEBT MARKETS SOVEREIGN BOND MARKET De, Supriyo Mohapatra, Sanket Ratha, Dilip Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| relation |
Policy Research Working Paper;No. 9401 |
| description |
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 1998-2017. 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. The analysis finds that while absolute 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,
which was characterized by easy monetary policies and global
liquidity, on the one hand, and greater caution and
discretion on the part of investors on the other. The
post-crisis effect of relative ratings appears to be driven
mostly by portfolio flows. These findings imply that
emerging and frontier markets need to pay greater attention
to their relative economic performance and not just their
sovereign ratings. Tracking changes in relative ratings
could help predict macroeconomic disturbances resulting from
volatile portfolio capital movements. |
| format |
Working Paper |
| author |
De, Supriyo Mohapatra, Sanket Ratha, Dilip |
| author_facet |
De, Supriyo Mohapatra, Sanket Ratha, Dilip |
| author_sort |
De, Supriyo |
| title |
Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| title_short |
Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| title_full |
Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| title_fullStr |
Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| title_full_unstemmed |
Sovereign Credit Ratings, Relative Risk Ratings, and Private Capital Flows |
| title_sort |
sovereign credit ratings, relative risk ratings, and private capital flows |
| publisher |
World Bank, Washington, DC |
| publishDate |
2020 |
| url |
http://documents.worldbank.org/curated/en/600951600350724639/Sovereign-Credit-Ratings-Relative-Risk-Ratings-and-Private-Capital-Flows http://hdl.handle.net/10986/34488 |
| _version_ |
1764481007381118976 |