What “hides” behind sovereign debt ratings?

Antonio Afonso, Pedro Gomes and Philipp Rother

No 711, Working Paper Series from European Central Bank

Abstract: In this paper we study the determinants of sovereign debt credit ratings using rating notations from the three main international rating agencies, for the period 1995-2005. We employ panel estimation and random effects ordered probit approaches to assess the explanatory power of several macroeconomic and public governance variables. Our results point to a good performance of the estimated models, across agencies and across the time dimension, as well as a good overall prediction power. Relevant explanatory variables for a country's credit rating are: GDP per capita, GDP growth, government debt, government effectiveness indicators, external debt, external reserves, and default history. JEL Classification: C23, C25, E44, F30, F34, G15, H63

Keywords: credit ratings; Panel data; random effects ordered probit; rating agencies; sovereign debt (search for similar items in EconPapers)
Date: 2007-01
Note: 375754
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Citations: View citations in EconPapers (66)

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Related works:
Working Paper: What “Hides” Behind Sovereign Debt Ratings? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007711

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