Do sovereign ratings cause instability in cross-border emerging CDS markets?

Abstract We analyse the cross-border transmission effect of credit ratings on sovereign CDSs covering a broad sample emerging countries during period 2004 to 2015. This study differentiates between spillover and competition effects within geographical areas countries. find substantial evidence with asymmetric responses upgrades downgrades. The market reaction differs across regions, reflecting how international local impact rating events are due different types effects. At portfolio level, competitive is dominant over effect. Negative in Asia benefit Africa (which also negatively affected by Asia) Middle East, latter transmitting turn same However, some found both at intra-portfolio levels. ones associated downgrades especially sensitive. In these cases, we identify particular economies that contribute an increase financial instability regional