On the Self-Fulfilling Prophecy of Changes in Sovereign Ratings

Ingmar Schumacher (1)

1 X-DEP-ECO - Département d'Économie de l'École Polytechnique

We empirically investigate the dynamic interactions between sovereign ratings and the macroeconomic environment. We use a Panel VAR on annual data for European countries from 1986-2010. Our results provide evidence for a significant two-way interaction between the macroeconomic environment and changes in sovereigns' ratings. Thus, rating changes are able to exacerbate a country's boom-bust cycle.

Mots clés: self-fulfilling prophecy; sovereign ratings; Panel VAR; self-fulfilling prophecy.

Domaines: Economies et finances

Ingmar Schumacher. On the Self-Fulfilling Prophecy of Changes in Sovereign Ratings. 2012. ⟨hal-00668284⟩