The Informational Value of Corporate Credit Ratings

This thesis examines the quality of credit ratings issued by the three major credit rating agencies - Moody’s, Standard and Poor’s and Fitch. If credit ratings are informative, then prices of underlying credit instruments such as fixed-income securities and credit default insurance should change to reflect the new credit risk information. Using data on 246 different major fixed income securities issuers and spanning January 2000 to December 2011, we find that credit default swaps (CDS) spreads do not react to changes in credit ratings. Hence credit ratings for all three agencies are not price informative. CDS prices are mostly determined by historical CDS prices while ratings are mostly determined by historical ratings. We find that credit ratings are marginally more sensitive to CDS than CDS are sensitive to ratings.

Letter from the Chairman of the Committee of Ways and Means to the Secretary of the Treasurer on the subject of a system of revenue to revive and maintain unimpaired the public credit, with the answer of the Secretary thereto. (1814)

October 18, 1814. Read, and committed to the Committee of the whole House on the report of the Committee of Ways and Means on so much of the President's message as relates to the finances of the United States.

Acyclic 5-Choosability of Planar Graphs Without Adjacent Short Cycles

The conjecture claiming that every planar graph is acyclic 5-choosable[Borodin et al., 2002] has been verified for several restricted classes of planargraphs. Recently, O. V. Borodin and A. O. Ivanova, [Journal of Graph Theory,68(2), October 2011, 169-176], have shown that a planar graph is acyclically 5-choosable if it does not contain an i-cycle adjacent to a j-cycle, where 3<=j<=5 if i=3 and 4<=j<=6 if i=4. We improve the above mentioned result and prove that every planar graph without an i-cycle adjacent to a j-cycle with3<=j<=5 if i=3 and 4<=j<=5 if i=4 is acyclically 5-choosable.

Effects of credit rating change on risk-taking

This thesis investigates whether there are changes in risk-taking behavior following an upgrade or downgrade in credit ratings. Research on effects of rating changes on capital markets is well-documented but the literature on how rating changes may affect firm behavior is sparse. Following, a downgrade in credit rating, managers may increase risk-taking to improve their overall performance or reduce risk-taking following upgrades to ensure that their performance is assessed more on the basis of what they may deem success in the form of an upgrade. Using a sample of firms trading in the U.S from 1994-2013, we find evidence of change in risk-taking behavior. We use cross-sectional regressions and matching using propensity scores and Barber and Lyon (1997) methodology to measure changes in risk-taking and we do find evidence of changes in managerial risk-taking behavior. Furthermore, we find that the direction of change (increase or decrease) in some cases is dependent on the type of measure rather than the type of rating change.

Credit to S.D. Woodruff from Pratt and Company for $150.00

Credit to S.D. Woodruff from Pratt and Company for $150.00, Sept. 7, 1876.

Credit to S.D. Woodruff from Pratt and Company for $62.00

Credit to S.D. Woodruff from Pratt and Company for $62.00, Nov. 6, 1876.

Does IMF Induce Political Business Cycles? An Empirical Analysis on Latin America's Indebted Countries.

Rapport de recherche

International Business Cycles: What Are the Facts?

Modern business cycle theory involves developing models that explain stylized facts. For this strategy to be successful, these facts should be well established. In this paper, we focus on the stylized facts of international business cycles. We use the generalized method of moments and quarterly data from nineteen industrialized countries to estimate pairwise cross-country and within-country correlations of macroeconomic aggregates. We calculate standard errors of the statistics for our unique panel of data and test hypotheses about the relative sizes of these correlations. We find a lower cross-country correlation of all aggregates and especially of consumption than in previous studies. The cross-country correlations of consumption, output and Solow residuals are not significantly different from one another over the whole sample, but there are significant differences in the post-1973 subsample.

Inflation Targeting Under Asymmetric Preferences

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate. In particular, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker's loss function. It is shown that some of the previous results derived under the assumption of symmetry are not robust to the generalization of preferences. Estimates of the central banker's preference parameters for Canada, Sweden, and the United Kingdom are statistically different from the ones implied by the commonly used quadratic loss function. Econometric results are robust to different forecasting models for the rate of unemployment but not to the use of measures of inflation broader than the one targeted.

Termes de l'échange endogènes et cycles économiques réels : une application à la Côte-d'Ivoire

À l’aide d’un modèle de cycles réels, la présente étude vise à expliquer, de façon endogène, les fluctuations des termes de l’échange en Côte-d’Ivoire. Pour ce faire, nous cherchons principalement à répondre aux deux questions suivantes : les chocs d’offre et de demande sur le marché d’exportation suffisent-ils à expliquer les variations des termes de l’échange? Et quelle est leur importance relative dans la dynamique des termes de l’échange? Les résultats montrent que les deux chocs considérés expliquent bien la volatilité des termes de l’échange. Nous avons noté que ces deux sources d’impulsions ont un impact significatif sur les fluctuations économiques en Côte-d’Ivoire.

The Inflation Bias When the Central Bank Targets, the Natural Rate of Unemployment

This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemployment deviations from the natural rate are weighted more (or less) severely than negative deviations in the central banker's loss function. The bias is proportional to the conditional variance of unemployment. The time-series predictions of the model are evaluated using data from G7 countries. Econometric estimates support the prediction that the conditional variance of unemployment and the rate of inflation are positively related.

Les cycles économiques et la science économique

Cette communication situe la théorie des grands cycles économiques dans le contexte général des économies de marché. Il y est postulé que le cycle financier et économique international de longue période (50-60 ans) n'est pas une aberration statistique, mais est le résultat de conditions institutionnelles, politiques, financières et économiques récurrentes dans l'économie mondiale. Il y est proposé comme hypothèse que la source des cycles financiers et économiques de longue durée origine d'un déréglement monétaire, lequel met en marche un processus auto-généré de sur-endettement, d'inflation des actifs financiers, de sur-investissement généralisé dans les équipements et de sur-production. Ce processus se résorbe par une liquidation des dettes, une déflation monétaire et par une contraction de l'activité économique, pouvant résulter en une récession alongée ou une dépression économique. L'information imparfaite et l'asymétrie dans l'information expliquent les erreurs de décisions des firmes à différentes périodes du grand cycle économique. Les chocs qui provoquent ces erreurs peuvent être géopolitiques (guerres), économiques, monétaires ou financiers. Les guerres sont des facteurs déclencheurs du grand cycle d'inflation-désinflation-déflation. (Communication pour le 53ème congrès de l'Association Internationale des économistes de langue française AIELF, Athènes mai 2003)

The Backing of Government Debt and the Price Level

This paper studies the interdependence between fiscal and monetary policies, and their joint role in the determination of the price level. The government is characterized by a long-run fiscal policy rule whereby a given fraction of the outstanding debt, say d, is backed by the present discounted value of current and future primary surpluses. The remaining debt is backed by seigniorage revenue. The parameter d characterizes the interdependence between fiscal and monetary authorities. It is shown that in a standard monetary economy, this policy rule implies that the price level depends not only on the money stock, but also on the proportion of debt that is backed with money. Empirical estimates of d are obtained for OECD countries using data on nominal consumption, monetary base, and debt. Results indicate that debt plays only a minor role in the determination of the price level in these economies. Estimates of d correlate well with institutional measures of central bank independence.