Risky Business: The Social Construction of Country Risk Ratings Pubblico
Pinheiro, Diogo Lemieszek (2010)
Abstract
Abstract
Risky Business: The Social Construction of Country Risk
Ratings
By: Diogo Lemieszek Pinheiro
The objective of this project is to understand the origins and
impact of Sovereign
and Country risk ratings. These ratings were created by key
financial agencies and serve
as a way of guiding a significant part of investment in developing
nations. This project
focuses on three key issues related to these risk ratings: their
adoption, their
implementation, and their current impact on policy. The first issue
addresses how an
abstract idea ( i.e., how financial risks should be
measured) gained support and spread
throughout the world. The second issue concerns how this idea was
implemented by
numerous financial service agencies. Finally, the third issue is
about the impact that these
ratings have on a nation's ability to borrow money, therefore
influencing policy.
Theoretically, this project deals with one of the key debates in
the social sciences: are
markets rational and efficient, or does uncertainty lead to the
adoption of certain
measures and policies because they are culturally and politically
legitimate? To answer
this question, this dissertation employs quantitative analyses,
looking at both the
statistical trends and the substantive discussions that involve the
creation of these ratings.
More specifically, I use different statistical techniques to show
that the spread of risk
ratings are not solely driven by market factors, and that these
ratings persist despite
known inaccuracies in their methodology. They are measures of
compliance with the
existing policy paradigm, and fail to adequately capture investment
risk. As such, they
play a key role in the adoption of certain policies even in the
face of financial crises
worldwide.
Risky Business: The Social Construction of Country Risk
Ratings
By
Diogo Lemieszek Pinheiro
M.A, Emory University, 2006
Advisor: Timothy J Dowd, PhD
A dissertation/thesis submitted to the Faculty of the James T.
Laney School of Graduate
Studies of Emory University in partial fulfillment of the
requirements for the degree of
Doctor of Philosophy in Sociology
2010
Table of Contents
Table of Contents:
Chapter 1- Theory and Historical Background
.............................................................
1
Chapter 2 - The Origins of Sovereign Risk Ratings: the timing of
their inception . 33
Chapter 3 - The Determinants of Country Risk Rating in Latin
America ............... 85
Chapter 4 - The Impact of Sovereign Risk Ratings on Economic
Performance .... 122
Chapter 5- Conclusion
..................................................................................................
141
References
......................................................................................................................
157
Tables and Figures:
Figure 2.1: Number of countries rated by each agency, and total
number of countries
rated by any of the 3 agencies
.......................................................................................
68
Figure 2.2: Number of countries rated by Moody's; regional
breakdown. ...................... 69
Figure 2.3: Number of Countries rated by Standard & Poor's; by
region ........................ 70
Figure 2.4: Number of Countries rated by Fitch Ratings; by region
................................ 71
Figure 2.5: Number of countries rated speculative grade and
investment grade, by agency
and overall
.....................................................................................................................
72
Figure 3.1: Mean Regional Scores for Abiad et al.'s Measure of
Financial liberalization
and Chinn And Ito's Measure of Capital Account Liberalization
.............................. 106
Figure 3.2: Number of nations receiving a speculative grade rating,
per region: ........... 107
Figure 4.1: Average Business Cycle Magnitude for Rated and Unrated
Nations in Latin
America:
......................................................................................................................
135
References
.......................................................................................................................
150
Table 2.1: Rating Scales for each of the Big Three CRAs and their
numerical conversion
.......................................................................................................................................
74
Table 2.2: Results for Moody's hazard models
................................................................
75
Table 2.3: Results for Standard & Poor's hazard models
................................................. 76
Table 2.4: Results for Fitch Ratings hazard models:
........................................................ 78
Table 2.5: Results for hazard models regarding being rated by any
agency .................... 80
Table 2.6: Mean difference in rating for the 3 agencies when the
same nation is rated by
all available agencies
....................................................................................................
82
Table 3.1: Number of unique default events, by region for all rated
nations ................. 109
Table 3.10: Logit models of the predictors of default
.................................................... 118
Table 3.2: Numerical transformation of the letter grade ratings
..................................... 109
Table 3.3: Results for the Cox Hazard selection equation models
................................. 110
Table 3.4: Determinants of Moody's Sovereign Risk Ratings
....................................... 113
Table 3.5: Determinants of S&P Sovereign Risk Ratings
.............................................. 114
Table 3.6: Determinants of Fitch's Sovereign Risk
Ratings........................................... 115
Table 3.7: Determinants of average Sovereign Risk
...................................................... 116
Table 3.8: Reduced form equations measuring the predictive power of
Sovereign Ratings
.....................................................................................................................................
117
Table 3.9: Comparing average ratings
............................................................................
117
Table 4.1: Panel Corrected Results for the Portfolio Investment on
Bonds Models ..... 136
Table 4.2: Panel Corrected Results for Interest Spread Models
..................................... 138
Table 4.3:
........................................................................................................................
140
Table 5.1: The Three Theoretical Perspectives and their Predictions
regarding Sovereign
Risk Ratings
................................................................................................................
148
Table A.1: Basic descriptive statistics
..............................................................................
83
Table A3.1: Correlation Matrix for Neoliberal Policy Variables
................................... 120
About this Dissertation
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