Public Debt & Sovereign Ratings - Do Industrialized Countries Enjoy a Privilege?

Bernd Bartels () and Constantin Weiser
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Bernd Bartels: Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany

No 1417, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: In this paper, we explore the institutional investors' assessment of relative creditworthiness across selected country groups with a special focus on the impact of public debt on the perception of sovereign risk. Our results show that general government debt is among the most important determinants of credit risk in industrialized countries and emerging markets alike. When using a multivariate framework, we further find that the inuence of debt on ratings do es not differ between both groups. Also, our results point towards a rating penalty for highly-indebted advanced countries when their debt ratio is associated with a growing one. By contrast, a high debt level alone does not lead to an additional rating decline. Finally, we show that peripheral euro area economies (GIIPS) received a rating privilege before the financial crisis that turned into a penalty after 2008.

Keywords: Sovereign Risk; Public Debt; European Monetary Union; Debt Sustainability (search for similar items in EconPapers)
JEL-codes: E62 F34 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-11-29, Revised 2014-11-29
New Economics Papers: this item is included in nep-eec and nep-mac
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https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1417.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:jgu:wpaper:1417

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