The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815-2007
NBER Working Paper No. 15128
We provide a comparison of salient organizational features of primary markets for foreign government debt over the very long run. We focus on output, quality control, information provision, competition, pricing, charging, and signaling. We find that the market setup experienced a radical transformation in the recent period, and we interpret this as resulting from the rise of liability insurance provided by rating agencies. Underwriters have given up their former role as gatekeepers of liquidity and certification agencies to become aggressive competitors in a new Speculative Grade market.
This paper was revised on December 5, 2011