Sovereign rescheduling probabilities in emerging markets: a comparison with credit rating agencies' ratings

A. Georgievska, L. Georgievska, A. Stojanovic and N. Todorovic

Journal of Applied Statistics, 2008, vol. 35, issue 9, 1031-1051

Abstract: This study estimates default probabilities of 124 emerging countries from 1981 to 2002 as a function of a set of macroeconomic and political variables. The estimated probabilities are then compared with the default rates implied by sovereign credit ratings of three major international credit rating agencies (CRAs) - Moody's Investor's Service, Standard & Poor's and Fitch Ratings. Sovereign debt default probabilities are used by investors in pricing sovereign bonds and loans as well as in determining country risk exposure. The study finds that CRAs usually underestimate the risk of sovereign debt as the sovereign credit ratings from rating agencies are usually too optimistic.

Keywords: sovereign debt; default probabilities; credit rating agencies; credit ratings (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (10)

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DOI: 10.1080/02664760802193112

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