Ratings, Debt, and Deficits: An Exploration

Olivier Blanchard, Daniel Leigh and Prachi Mishra

No 2026/195, IMF Working Papers from International Monetary Fund

Abstract: We look at the effects of debt and primary fiscal balances on sovereign credit ratings through the lens of a simple model. We find that the ratings differ from the implications of the model in three important ways. They give much more weight to debt relative to forecast primary balances. They understate the effects of the difference between the interest rate and the growth rate. They give a very large role to country effects. For the same level of debt and forecast primary balances, they imply extremely different ratings across countries, and imply extremely different levels of debt needed to reach a given rating.

Keywords: Debt; deficits; ratings; forecasts (search for similar items in EconPapers)
Pages: 48
Date: 2026-09-18
New Economics Papers: this item is included in nep-opm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.imf.org/en/publications/longres?sk=579729 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2026/195

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().