Understanding sovereign rating movements in euro area countries
Jan Bruha (),
Ralph Setzer () and
No 2011, Working Paper Series from European Central Bank
This paper investigates the link between sovereign ratings and macroeconomic fundamentals for a group of euro area countries which recorded rating downgrades amid the euro area sovereign debt crisis. We apply an elaborated econometric estimation technique, based on a Bayesian ordered probit model, to understand how the decisions of rating agencies can be explained by economic developments. The estimated model re-produces historical ratings by using a small number of economic and institutional variables, which seem to effectively summarize the large number of criteria used by Moody JEL Classification: C25, G24, H63, H68
Keywords: euro area crisis; panel probit model; sovereign debt; sovereign rating (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20172011
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