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Dependency between sovereign credit ratings and economic risk: Insight from Balkan countries

Seyed Alireza Athari, Mehmet Kondoz and Dervis Kirikkaleli

Journal of Economics and Business, 2021, vol. 116, issue C, No S0148619521000023

Abstract: This paper examines the time and frequency co-movement between sovereign credit ratings and economic risk for five Balkan countries, namely Bulgaria, Greece, Croatia, Romania, and Slovenia, during the 1999Q1 to 2018Q4 period. To the best of knowledge, this is the first study attempt to conduct this nexus. We measured the sovereign credit scores by using the ratings and outlooks of Standard & Poor's (S&P), Moody's, and Fitch Ratings. The empirical findings reveal that there is a one-way causality running from the sovereign credit ratings to economic risk in Bulgaria and Croatia in the long-term. Also, it shows that there is a feedback causality between sovereign credit ratings and economic risk in Greece, Romania, and Slovenia. Results are robust and similar from both the time and frequency domains causality techniques.

Keywords: Sovereign ratings; Economic risk; Time-domain causality; Frequency-domain causality; Balkan countries (search for similar items in EconPapers)
JEL-codes: C22 G24 O16 P17 R11 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jeconbus.2021.105984

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