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Selling the FutureThe Perils of Predicting Global Politics$
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Ariel Colonomos

Print publication date: 2016

Print ISBN-13: 9780190603649

Published to Oxford Scholarship Online: September 2016

DOI: 10.1093/acprof:oso/9780190603649.001.0001

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The Risk Market

The Risk Market

Credit Ratings

(p.125) 5 The Risk Market
Selling the Future

Ariel Colonomos

, Gregory Elliott
Oxford University Press

This chapter studies the making of sovereign ratings, i.e. ratings about the creditworthiness of states, and underlines some of their economic and political effects. The rating companies’ market is oligopolistic and composed mainly of three large firms, Standard & Poor’s, Moody’s, and Fitch. This chapter shows the convergence of opinions about the willingness of states to reimburse their debts and their willingness to do so. Rating agencies are rather conservative, i.e. they tend not to change their ratings too frequently. This creates an environment of stability. As in the case of modernization theory (chapter 3), this favors inertia. In some cases, Credit ratings agencies prolong the present and delay the future. This happens when they don’t change their ratings of countries that face significant financial problems. In turn, investors are not dissuaded from disinvesting from these countries, thereby delaying national defaults.

Keywords:   Future, Finance, Sovereign ratings, Standard & Poor’s, Moody’s, Creditworthiness, Greece, Asia Financial crisis, Procyclical

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