Ratings accuracy

Credit ratings and conflicts of interest

That overly optimistic credit ratings contributed significantly to the Great Financial Crisis is now widely acknowledged (see, for example, here and here). One welcome result has been a wave of research that highlights the influence of biased credit ratings on the real economy and identifies potential remedies. In this note, we examine stylized facts about ratings performance that emerge from this new work; discuss the economic impact of ratings; and, finally, consider remedies for conflicts of interest that contribute to the problem...

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