Rating Through-The-Cycle: What Does the Concept Imply for Rating Stability and Accuracy?

• Author: John Kiff, Michael Kisser, and Liliana Schumacher
• Pages: 1-6

IMF

Volume 14, Number 4 December 2013

www.imf.org/researchbulletin

B U L L E T I N

1

Rating Through-The-Cycle:

What Does the Concept Imply for

Rating Stability and Accuracy?

John Kiff, Michael Kisser, and Liliana Schumacher

Credit rating agencies face a

difficult tradeoff between deliv-

ering both accurate and stable

ratings. While ratings should

provide the most accurate

estimate of the correspond-

ing default risk of an underlying asset, users of ratings often prefer that they do

not change too frequently. Rating agencies therefore generally assign ratings on a

more stable “through-the-cycle” basis whereas banks’ internal valuations are often

based on a “point-in-time” perspective, reflecting the current value of a rated

entity’s or instrument’s underlying assets. This article summarizes recent research

that compares the two approaches and assesses their impact on rating stability

and accuracy.

Reforming Dual Labor Markets In

Advanced Economies

Giovanni Ganelli

Labor market duality has increased dramatically in many

advanced countries in recent years. While duality has some posi-

tive aspects, microeconomic and cross-country studies suggest

that an excessive reliance on “non-regular” employment has a

negative impact on total factor productivity (TFP) and growth.

This article summarizes recent research on this topic, and draws

some policy implications for reforms aimed at reducing duality and creating more

inclusive labor markets in advanced economies.

Labor market dualit y—a two tier job market—has increased dramatic ally in

many advanced economies in recent yea rs. is has resulted in a growing share of

“non-regular” workers, with a much lower level of employment protection, as well

as lower wages and career prospects c ompared to “regular” workers. e deni-

tion of non-regular employment changes from countr y to country, but one indi-

cator available for international compar isons, the share of temporary workers,

(continued on page 4)

In This Issue

1 Reforming Dual Labor

Markets In Advanced

Economies

1 Rating Through-The -Cycle:

What Does the Concept

Imply for Rating Stability

and Accuracy?

7 Q&A: Seven Questions

on Financial Crises:

Perspectives from the

Frontier of Research

10 IMF Working Papers

13 Recommended Readings

from the IMF Bookstore

14 Staff Discussion

Notes

14 IMF Economic Review

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Research Summaries