ICAR Research Data Repository for Knowledge Management
Sovereign Credit Ratings and the Transnationalization of Finance - Evidence from a Gravity Model of Portfolio Investment [Dataset]
Harvard Dataverse (Africa Rice Center, Bioversity International, CCAFS, CIAT, IFPRI, IRRI and WorldFish)
View Archive Info| Field | Value | |
| Title |
Sovereign Credit Ratings and the Transnationalization of Finance - Evidence from a Gravity Model of Portfolio Investment [Dataset]
|
|
| Identifier |
https://doi.org/10.7910/DVN/26723
|
|
| Creator |
Koerner, Finn Marten
Trautwein, Hans-Michael |
|
| Publisher |
Harvard Dataverse
|
|
| Description |
It is a matter of debate in how far credit ratings contribute to allocative efficiency or to excessive volatility of asset prices and cross-border capital flows. Yet it is generally taken for granted that ratings play a significant role in the transnationalization of financial relations. This paper tests that hypothesis with data on sovereign credit ratings and foreign portfolio investment. A rating-related gravity model of finance is derived from the choice-theoretical framework of Okawa and van Wincoop (Gravity in International Finance, 2012) and estimated in three stages. At the first stage, the authors find that the introduction and evolution of sovereign ratings since the 1970s has affected inward portfolio investment in host countries. At the second stage, they examine to which extent sovereign ratings help to predict the degree of investors'Â home bias, and whether they can account for the divergent dynamics before and after the global financial cri sis. At the third stage, the authors look at the explanatory content of ratings for the determination of the size of bilateral portfolio investment. Evidence for a significant role of sovereign ratings is found at all three stages. |
|
| Subject |
Social Sciences
Credit rating agencies Portfolio investment Gravity model Home bias |
|
| Date |
2015
|
|
| Type |
aggregate data
|
|