Revisiting the time-varying credit rating policy: a new test of procyclicality

Daniel Hwang, Yongjun Kim

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


This article investigates whether agencies’ rating policy varies over macroeconomic cycle. We develop a novel two-stage estimation procedure to find that the rating policy becomes more strict after economic downturn than expansion, consistent with theoretical predictions. Moreover, from the horse race between various macroeconomic indicators, we find that the default spread serves as the strongest indicator for the time variation of rating standard.

Original languageEnglish
Pages (from-to)810-815
Number of pages6
JournalApplied Economics Letters
Issue number10
StatePublished - 6 Jun 2020


  • Credit rating
  • business cycle
  • default spread
  • rating agency


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