Analysis Of The Impact Of Changes In Sovereign Credit Ratings On Financial Markets In BRICS Countries

With the globalization of the economy and finance,there have been more financial transactions and cooperation between countries.The emergence of rating agencies and the development of sovereign credit rating services have somewhat eased the information asymmetry in financial markets.Sovereign credit rating has become increasingly important to the financial markets.Empirical and historical events show that sovereign credit rating will affect the financial markets of the rated countries,which mainly reflected in the fluctuations of bond market,stock market and foreign exchange market.In this paper,Panel Var model is used to study the impact of sovereign credit rating on BRICS financial markets.It is found that changes in the sovereign credit rating will increase the volatility of the stock market,the bond market,and the foreign exchange market,and will have different responses to different markets.In addition,it was also discovered that before and after the financial crisis,the impact of sovereign credit ratings on the financial markets of the BRICS countries was different.After the financial crisis,the impact was greater than before.This shows that the financial markets of the BRICS countries have increased their dependence on sovereign credit ratings.Now,the market is more in need of such products as sovereign credit ratings to ease information asymmetry.Finally,comparing the impact of credit ratings on the financial markets of each BRICS country,the impact will be different.Therefore,both the BRICS countries and other developing countries need to develop and improve their own financial market mechanisms.They should also build home-grown sovereign credit ratings,and at the same time strengthen their ability to respond to changes in sovereign credit ratings(especially declines)and maintain financial market stability.