Credit ratings and the pricing of sovereign debt during the euro crisis
研究了信用评级变化对欧洲主权CDS利差的影响，发现评级变化具有信息含量且经济显著，但影响呈非线性U型模式，且危机期间GIIPS国家与其他欧洲国家差异显著。
This paper identifies the impact of credit rating changes on the sovereign spreads in Europe and investigates the macro and financial factors that account for the time varying effects of a given credit rating change. We find that changes of ratings are informative, significant economically, and robust even after controlling for conventional fundamentals. A one unit rise in the average credit rating (in a scale index of 25 ratings) decreases CDS spreads by about 45 basis points, on average. However, the association between credit rating changes and spreads follows a complicated non-linear pattern dependent on the level of the credit rating. Applying a non-linear "spline" regression, we find high sensitivity (large change in spreads for a given change in ratings) at the very low end of credit ratings and then a U shape pattern--ratings at the moderately low end (B-) and very high end of credit levels (above A) are fairly insensitive, while middle ratings are quite sensitive to credit rating changes (with the highest sensitivity at the BB+ level). We also find that European countries had quite similar CDS responses to credit rating changes during the pre-crisis period, but that large differences emerged between the now highlysensitive GIIPS group and other European country groupings (EU and Euro Area excluding GIIPS, and the non-EU area). We also find that contagion from changing the ranking of the GIIPS on other euro countries disappears when own-country credit rating changes are taken into account. In contrast, a decline in the credit rating in the GIIPS area is transmitted as a decline in the CDS spread of Non-Euro EU, which may be deemed as a substitute asset that increases in demand when the perceived risk of GIIPS sovereign debt increases.