Sovereign credit ratings in Latin America and the Caribbean: history and impact on bond spreads

Bustillo, Inés, Perrotti, Daniel and Velloso, Helvia (2019) Sovereign credit ratings in Latin America and the Caribbean: history and impact on bond spreads. Economía, 20 (1). 155 - 196. ISSN 1529-7470

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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.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2019 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O54 - Latin America; Caribbean
Date Deposited:	03 Jul 2024 17:09
Last Modified:	17 Oct 2024 01:51
URI:	http://eprints.lse.ac.uk/id/eprint/123197

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