APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

June 12, 2019. (Wednesday) 15:00-16:00

Institute of Developing Economies, Japan External Trade Organization C23 Meeting Room 　

On Misratings in Sovereign Credit Risk: A Frontier Approach

This study analyzes misratings in sovereign credit risk. The analysis uses partial frontier methods, a technique barely applied in this literature. By combining a robust variant of the Free Disposal Hull (FDH) estimator, we measure misratings (both underratings and overratings) for individual countries and groups of countries. Particular attention is paid to comparing pre-crisis and crisis years in order to assess possible changes in the magnitude of the misratings. Our findings indicate a remarkable degree of both overratings and underratings during the analyzed period (1999-2010). These misratings partially vanish during the last years of the sample (2008-2010) -corresponding to the financial crisis- when many downgrades took place, especially in Eurozone countries. The results allow us to emphasize the importance of monitoring misratings for sustainable financial stability. These results also show the potential benefits of using partial frontier methods for measuring both underratings and overratings.

Huseyin Ozturk (VRF)

Yasushi Hazama

English