TY  - JOUR
AU  - Rigobon,Roberto
TI  - The Curse of Non-Investment Grade Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8636
PY  - 2001
Y2  - December 2001
UR  - http://www.nber.org/papers/w8636
L1  - http://www.nber.org/papers/w8636.pdf
N1  - Author contact info:
Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu
AB  - 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.
ER  -