Sovereign credit ratings during the COVID-19 pandemic.

Tran, Yen; Vu, Huong; Klusak, Patrycja; Kraemer, Moritz; Hoang, Tri

Abstract

Using 603 sovereign rating actions by the three leading global rating agencies between January 2020 and March 2021, this paper shows that the severity of sovereign ratings actions is not directly affected by the intensity of the COVID-19 health crisis (proxied by case and mortality rates) but through a mechanism of its negative economic repercussions such as the economic outlook of a country and governments' response to the health crisis. Contrary to expectations, credit rating agencies pursued mostly a business-as-usual approach and reviewed sovereign ratings when they were due for regulatory purposes rather than in response to the rapid developments of the pandemic. Despite their limited reaction to the ongoing pandemic, sovereign rating news from S&P and Moody's still conveyed price-relevant information to the bond markets. [Abstract copyright: © 2021 Published by Elsevier Inc.]

Citation

Tran, Y., Vu, H., Klusak, P., Kraemer, M., & Hoang, T. (2021). Sovereign credit ratings during the COVID-19 pandemic. International Review of Financial Analysis, 78, Article 101879. https://doi.org/10.1016/j.irfa.2021.101879

• Journal Article Type: Article
• Acceptance Date: Sep 1, 2021
• Publication Date: Oct 12, 2021
• Deposit Date: Jan 2, 2023
• Journal: International Review of Financial Analysis
• Print ISSN: 1057-5219
• Electronic ISSN: 1873-8079
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 78
• Article Number: 101879
• DOI: https://doi.org/10.1016/j.irfa.2021.101879
• Keywords: Economic outlook, Rating calendars, Sovereign credit ratings, COVID-19
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1057521921002088