These can be felt harder by the poorer households who, unlike the wealthier ones, do not have the possibility of ‘hedging themselves’ from the consequences of a downgrade by diversifying their assets. There are five major channels through which the recent rating downgrades can undermine the well-being of poorer households, which I will discuss more in detail.
Page 2 of 10  The ratings of a listed entity (be it a government or a corporation) are meant to reflect its ‘credit quality’. Hence, they are used by international investors to gauge the risk of buying the bonds issued by that entity.