In the aftermath of the global financial crisis and great recession, many countries face substantial deficits and growing debts. In the United States, federal government outlays as a ratio to GDP rose substantially from about 19.5 percent before the crisis to over 24 percent after the crisis. In...

In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of...

This paper deals with the proposed use of sovereign credit ratings in the Basel Accord on Capital Adequacy (Basel II) and considers its potential effect on emerging markets financ-ing. It investigates in a first attempt the consequences of the planned revisions on the two central aspects of...

Credit rating changes for long-term foreign currency debt may act as a wake-up call with up-grades and downgrades in one country affecting other financial markets within and across national borders. Such a potential (contagious) rating effect is likely to be stronger in emerg-ing market...

The experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets,...

This paper studies the use of performance pricing (PP) provisions in debt contracts and compares accounting-based with rating-based pricing designs. We find that rating-based provisions are used by volatile-growth borrowers and allow for stronger spread increases over the credit period....

In this paper we challenge the view that corporate bonds are always arm's length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if...

The experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies’ evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets,...

This paper deals with the proposed use of sovereign credit ratings in the "Basel Accord on Capital Adequacy" (Basel II) and considers its potential effect on emerging markets financ-ing. It investigates in a first attempt the consequences of the planned revisions on the two central aspects of...

Credit rating changes for long-term foreign currency debt may act as a wake-up call with up-grades and downgrades in one country affecting other financial markets within and across national borders. Such a potential (contagious) rating effect is likely to be stronger in emerg-ing market...