The Curse of Non-Investment Grade Countries / Roberto Rigobon.

Format:

Book

Author/Creator:

Rigobon, Roberto.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8636.

NBER working paper series no. w8636

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

Mexico was upgraded from non-investment to investment grade in March of 2000. This paper examines the impact of this event on the properties of the transmission of shocks between Argentina and Mexico. The paper shows that there is a statistically significant change in the propagation of shocks the day the upgrade was announced. Furthermore, it is found that the parameters that shifted are those explaining the diffusion of shocks through the means, while the transmission through the variances remained stable. Moreover, the change in the estimated coefficients can explain more than a third in the unconditional comovement that these assets experienced before the upgrade. From the methodological point of view, the paper offers an identification procedure based on conditional heteroskedasticity (ARCH) that solves the problem of estimation in a linear simultaneous equations model that can be used in other Macro and Finance applications.

Notes:

Print version record

December 2001.