Assessing the impact of COVID-19 induced rating downgrades on Eurobond yields in Africa
African Review of Economics and Finance-Aref
; 13(1):83-103, 2021.
Article
in English
| Web of Science | ID: covidwho-1576362
ABSTRACT
There was an outcry from policymakers over sovereign credit rating downgrades of African countries during the unprecedented COVID-19 lockdown periods. This study investigates whether sovereign downgrades during the time African countries were hit by COVID-19 had an impact on sovereign bond yields. Applying an event study analysis on the Eurobonds yields of 4 African countries that were downgraded during this period shows that there is significant evidence of excess volatility around the downgrade event and a net increase in yields within the rating event window. The results align to the view that rating agencies negatively impact macroeconomic conditions through their procyclical ratings. Hence, ratings should be regulated and controlled during crises times to avoid the procyclical impact of ratings.
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Collection:
Databases of international organizations
Database:
Web of Science
Type of study:
Experimental Studies
Language:
English
Journal:
African Review of Economics and Finance-Aref
Year:
2021
Document Type:
Article
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