Contagion effects of sovereign credit rating revisions on the real economy: is it trade or finance?. Issue 52 (8th November 2018)

• Record Type: Journal Article
• Authors: Chen, Hsien-Yi; Yang, Shu-Ling
• Is Part Of: Applied economics. Volume 50:Issue 52(2018)
• Page Start: 5604
• Page End: 5619
• Publication Date: 2018-11-08
• Subjects: Sovereign credit rating revision -- contagion effect -- output growth -- real economy; F34 -- G24 -- H63 -- O47; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2018.1488056
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: We analyse the contagion effects of sovereign credit rating revisions on the real economy, with particular emphasis on the intensity of trade and finance channels. Our findings show that event countries that experienced rating revisions cause substantial contagion effects on the real output growth rates of nonevent countries. Nonevent countries with a high export ratio, high external debt levels, or those that are more dependent on common bank credit relative to other nonevent countries are more likely to be infected by event countries' adverse credit shocks. The results remain after accounting for alternative real economy indicators, financial liberalization, financial crises, and economic development status.