Brian Romanchuk — Why The JGB Market Ignored Moody’s Downgrade

Moody's being, well, just moody. Why it's off in left field in its risk analysis of the JGB.


Bond Economics
Why The JGB Market Ignored Moody’s Downgrade
Brian Romanchuk

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The Ratings Agencies Are At It Again
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Brian Romanchuk — Currency Regimes Matter If Policymakers Understand Them

In this article, Antonia Fatas argues that exchange rate regimes (like the euro) have limited power to explain differences of economic outcomes. It is based on an article by Andrew K. Rose, which looks at the currency regimes of smaller (mainly developing) economies during the global financial crisis.

Paul Krugman responded here, noting that bond yields only rose due debt concerns in the euro countries. From the point of view of the bond markets, that is a crucial point: a country that does not control the currency of its debt emissions is just another credit market borrower, and can end up facing prohibitive default risk premia.

Since his article illustrates that point well, I will discuss here the non-interest rate aspects of this debate. The currency regime is a critical component of Modern Monetary Theory (MMT), and so this debate is very important for understanding MMT.

Bond Economics
Currency Regimes Matter If Policymakers Understand Them
Brian Romanchuk