How giant discoveries of natural resources impact sovereign debt ratings in developing and emerging countries ?

Regina Seri ()
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Regina Seri: CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne

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Abstract: This paper sheds light on the effects of giant discoveries of natural resources (oil natural gas, minerals) on sovereign debt ratings in the short and long run. To do so, it employs 28 developing and emerging countries over the period 1990-2014 and applies a random effect ordered Probit model on different sets of samples. It shows evidence of the differentiated effects (positive and negative) of giant discoveries on ratings. These differentiated effects are linked to the behavior of macroeconomic and political indicators resulting from the actions and policies taken in the aftermath of the discoveries. It also finds evidence of the learning effects of giant discoveries in countries with increasing sovereign debt ratings. What seems to matter is not only the resources but also how governments respond to the news of the discovery of those resources. Therefore, taking the right actions and policies will help countries to prevent a deterioration of their financial conditions.

Keywords: Giant discoveries; Natural resources; Sovereign debt ratings; Developing countries; Random effect ordered response models (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-dev and nep-ene
Note: View the original document on HAL open archive server: https://uca.hal.science/hal-03144330v1
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