Rating Government Bonds: Can We Raise Our Grade?

Marc Joffe

Econ Journal Watch, 2012, vol. 9, issue 3, 350-365

Abstract: Yields on sovereign and municipal bonds are largely determined by perceptions of default risk. The traditional providers of default risk assessments are the credit rating agencies, which have of late suffered damaged reputations. The author, a former Senior Director at Moody’s Analytics, argues that rating agency assessments of government bonds suffer from a failure to use modern social science research methods. He contends that economists and other academics are better suited to the task of estimating the likelihood of government bond defaults. Economists can provide an alternative source of analysis by collecting and analyzing time series of fiscal data and building simulations of future revenues and expenditures. To encourage more academics to enter this field, the author is contributing historical data and an open-source simulation platform.

Keywords: Sovereign; municipal; debt; bonds; credit ratings (search for similar items in EconPapers)
JEL-codes: G12 H60 H63 H68 (search for similar items in EconPapers)
Date: 2012
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