Country’s credit rating and exchange rates

Predicting Credit Rating and Credit Rating Changes: A New Approach

In this paper, we propose a hazard rate model for studying credit rating and credit rating changes. Theoretically the hazard rate model is more appropriate than the previous static models. Yet it is difficult to estimate hazard rate model, especially when the covariates are time-varying. This paper extends the results of Shumway(2001) and shows that a multiple-state hazard rate model can be est...

Connecting Credit Grantors and Credit Requestors: Towards the Electronic Exchange of Rating-Relevant Information

Before granting new credits, banks must gather qualitative and quantitative information about their prospective customers in order to start a rating process which allows them to assess the credit requestor’s risk class. Driven by intense structural changes within the financial industry and as a result of the specifications of the Basle II accord with regard to the rating process, banks are curr...

Do Fixed Exchange Rates Fetter Monetary Policy ? A Credit

The Bernanke-Blinder credit-view model is expanded to encompass a small, open economy with fixed exchange rates. In contrast to conventional wisdom and traditional models, monetary policy is resurrected as a stabilization tool. Further, various financial sector shocks are shown to have real aggregate demand effects. We show that independent monetary policy actions can ha ve substantive impacts ...

3 The Credit Rating Crisis

By December 2008, structured finance securities accounted for over $11 trillion worth of outstanding U.S. bond market debt (35%). The lion’s share of these securities was highly rated by rating agencies. More than half of the structured finance securities rated by Moody’s carried a AAA rating—the highest possible credit rating. In 2007 and 2008, the creditworthiness of structured finance securi...

Nonlinearity In Exchange Rates and Forecasting