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In Rememberance: World Trade Center (WTC)

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To Err is Human: US rating agencies and the interwar foreign government debt crisis

by Marc Flandreau of the Graduate Institute of International and Development Studies,
Norbert Gaillard of Sciences Po, Paris, and
Frank Packer of the Bank for International Settlements

December 2010

Abstract: During the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we do not find that superior forecasting capacities can explain the agencies' growing importance.

JEL Classification: E44, F34, G15, N20.

Keywords: sovereign credit ratings, Great Depression, financial crisis, international bond markets

Previously titled: To Err is Human: Rating agencies and the interwar foreign government debt crisis

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