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Understanding sovereign rating movements in euro area countries

Beatrice Pierluigi, Jan Bruha (), Ralph Setzer () and Moritz Karber

No 2011, Working Paper Series from European Central Bank

Abstract: 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)
New Economics Papers: this item is included in nep-eec
Date: 2017-02
Note: 591179
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Handle: RePEc:ecb:ecbwps:20172011