Credit Rating and Debt Crises

Steinar Holden, Gisle James Natvik & Adrien Henri Vigier

Published in:

International Economic Review, Volume 59, Issue 2, May 2018.

DOI: 10.1111/iere.12293


We develop an equilibrium theory of credit rating in the presence of rollover risk. By influencing rational creditors, ratings affect sovereigns' probability of default, which in turn affects ratings. Our analysis reveals a pro‐cyclical impact of credit rating: In equilibrium the presence of a rating agency increases default risk when it is high and decreases default risk when it is low.

By Photo: International Economic Review
Published Oct. 23, 2018 3:19 PM - Last modified Oct. 23, 2018 3:19 PM