THE ROLE OF CREDIT RATING AGENCIES AND SPILLOVER EFFECTS OF FINANCIAL LIBERALIZATION

After the financial crisis of 2008-2009 a lot of debate was around the role of credit rating agencies in the risk management process. This work will discuss the effect of the three main credit rating agencies (CRAs): Standard & Poor's (S&P), Fitch Ratings (Fitch) and Moody's on the sovereign yield spreads in the 10 European countries (Austria, Belgium, Finland, France, Greece, Ireland, Italy, Netherlands, Portugal and Spain). Particularly, the role of the sovereign rating actions in determining sovereign spreads and contagion effect of the rating changes in heavily suffered countries on the sovereign spreads of the other countries will be discussed.