Local debts, international authority : rating agencies' emergence in regulating subnational debt

This thesis explores the growth of subnational debt ("SND") and the different regulatory responses to this debt. It focuses on the recent emergence of credit rating agencies (e.g. Standard & Poor's, Moody's and Fitch) as an alternative regulatory mechanism, which has the potential to stabilize these markets, improve risk pricing, and alter traditional conceptions of local governance. The first chapter traces SND's long legacy of debt defaults, federal bailouts, and improperly priced risk; as well as the profound benefits that SND can provide to local governments, particularly as a means of resisting the siren song of privatization. Unfortunately, it finds that conventional strategies for regulating SND - including federal oversight, financial rules and market discipline - have not properly balanced these trade offs and have left lingering moral hazards, overly restricted debt markets, and a legacy of mispricing. The second chapter examines the emergence of debt rating agencies in Mexico as a possible alternative. It traces their growth, particularly the role of domestic and international agreements, their methodology, and their historic accuracy. It finds that they should improve debt pricing and obviate moral hazards when compared to existing regulatory interventions.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Urban Studies and Planning.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2006

Author dc:creator

• Sathe, Ommeed S. (Ommeed Sanjay)

Advisor dc:contributor.advisor

• Balakrishnan Rajagopal.

• Urban Studies and Planning.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/37469

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/37469