Sovereign Ratings: An Analysis of the Degree, Changes and Source of Moodys Judgement
Rudolf Alvise Lennkh (a.lennkh@scoperatings.com) and
Edmund Moshammer (e.moshammer@esm.europa.eu)
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Rudolf Alvise Lennkh: Scope ratings
Edmund Moshammer: ESM
Working Papers from European Stability Mechanism
Abstract:
This paper studies the sovereign ratings of 74 countries from 2003 to 2016, disentangling rating drivers into a fundamental and judgement component based on Moodys methodology. We show that the agency applies judgement inconsistently across regions, income, rating levels and factors, time and the direction of rating changes. While downgrades are significantly linked to contemporaneous negative fundamental developments, such as weakening public finances, for upgrades we find evidence of a lagged or ‘catching-up’ effect. Out of the 29 tested explanatory variables, judgement applied by the rating committee is best explained through government bond yields, real GDP growth, the debt trend and interest payments relative to revenues.
Keywords: Credit rating agencies; sovereign risk; sovereign rating (search for similar items in EconPapers)
JEL-codes: F34 G15 G24 H63 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2018-03-02
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Citations: View citations in EconPapers (6)
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Persistent link: https://EconPapers.repec.org/RePEc:stm:wpaper:27
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