This paper analyzes alternative models for emerging sovereign ratings. Although a small number of economic fundamentals … explain ratings reasonably well, variations in those economic fundamentals are themselves explained by a small number of world … explain the significant spread compression at the end of 2006. To determine whether ratings matter for spreads, the paper …

changes may be anticipated, testing whether ratings add value is not straightforward. This paper argues that ratings and … spreads are both noisy signals of fundamentals and suggest ratings add value if, controlling for spreads, they help explain … other variables. The paper additionally analyzes the different actions (ratings and outlooks) of the three leading agencies …