Citation

Rating Agencies as Enforcers: Do Sovereign Ratings Respond to European Fiscal Surveillance under SGP?

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Abstract:

After it broke down in 2002 as an intergovernmental economic coordination device, the Stability and Growth Pact (SGP) was reformed and rebranded in 2005 as a way of providing supranational support to member states in improving their domestic fiscal policy – with special emphasis on the sustainability of public finances. The new system of commitments to medium term objectives and detailed reporting by governments, complemented by reviews of budgetary developments at the EU level, is aimed at improving domestic policy making through maximizing transparency and accountability. However, in the absence of credible sanctions from the Commission (the pecuniary penalty for excessive deficits is not credible since the 2002 crisis) such a system of commitments and transparency can only work if failure to pursue prudent fiscal policy generates substantial audience costs (Lohmann 2003) for governments. Such audience costs are expected to be afflicted by voters or financial markets. This paper looks at rating agencies – as a segment of the latter “audience” – to examine whether they are receptive to the SGP’s efforts to create more transparency and accountability. Quantitative and qualitative techniques are applied to explore whether and to what extent ratings substantively use information produced within the new SGP framework and attach significance to the outcomes of budgetary reviews at the EU. The results are used to evaluate the indirect pressure the new SGP can bring to bear on governments.

Most Common Document Word Stems:

rate (140), fiscal (100), inform (70), data (64), govern (61), agenc (57), report (54), market (50), ef (47), polici (46), european (37), countri (36), time (32), debt (32), p (31), chang (31), new (30), fitch (29), one (29), term (28), deficit (28),
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Association:
Name: Seventeenth International Conference of the Council for European Studies
URL:
http://www.ces.columbia.edu


Citation:
URL: http://citation.allacademic.com/meta/p399859_index.html
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MLA Citation:

Barta, Zsófia. and Shum, Robert. "Rating Agencies as Enforcers: Do Sovereign Ratings Respond to European Fiscal Surveillance under SGP?" Paper presented at the annual meeting of the Seventeenth International Conference of the Council for European Studies, Grand Plaza, Montreal, Canada, Apr 15, 2010 <Not Available>. 2014-11-27 <http://citation.allacademic.com/meta/p399859_index.html>

APA Citation:

Barta, Z. and Shum, R. , 2010-04-15 "Rating Agencies as Enforcers: Do Sovereign Ratings Respond to European Fiscal Surveillance under SGP?" Paper presented at the annual meeting of the Seventeenth International Conference of the Council for European Studies, Grand Plaza, Montreal, Canada Online <APPLICATION/PDF>. 2014-11-27 from http://citation.allacademic.com/meta/p399859_index.html

Publication Type: Individual Paper
Review Method: Peer Reviewed
Abstract: After it broke down in 2002 as an intergovernmental economic coordination device, the Stability and Growth Pact (SGP) was reformed and rebranded in 2005 as a way of providing supranational support to member states in improving their domestic fiscal policy – with special emphasis on the sustainability of public finances. The new system of commitments to medium term objectives and detailed reporting by governments, complemented by reviews of budgetary developments at the EU level, is aimed at improving domestic policy making through maximizing transparency and accountability. However, in the absence of credible sanctions from the Commission (the pecuniary penalty for excessive deficits is not credible since the 2002 crisis) such a system of commitments and transparency can only work if failure to pursue prudent fiscal policy generates substantial audience costs (Lohmann 2003) for governments. Such audience costs are expected to be afflicted by voters or financial markets. This paper looks at rating agencies – as a segment of the latter “audience” – to examine whether they are receptive to the SGP’s efforts to create more transparency and accountability. Quantitative and qualitative techniques are applied to explore whether and to what extent ratings substantively use information produced within the new SGP framework and attach significance to the outcomes of budgetary reviews at the EU. The results are used to evaluate the indirect pressure the new SGP can bring to bear on governments.


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