Alternative sources of the lag dynamics of inflation

Data on credit ratings by the agencies with the legal status of Nationally-Recognized Statistical Rating Organizations (NRSROs) show some tendency for one-day downgrades that start from the lowest investment grade, BBB-, to travel more grades than those from neighboring grades. This would be consistent with the lower threshold of the NRSROs’ grade BBB- being at a substantial default probability, but also could occur simply because downgrades to junk severely impair some firms’ operations. A comparison of data from a non-NRSRO agency and an NRSRO shows that the latter’s regrades from BBB moved in the direction of the non-NRSRO’s earlier ratings. This suggests the non-NRSRO defines its grade BBB- more narrowly than the NRSRO.