Sovereign Credit Rating Mismatches

Antonio Afonso and André Albuquerque ()

No 2017/02, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: We study the factors behind split ratings in sovereign credit ratings from different agencies, for the period 1980-2015. We employ random effects ordered and simple probit approaches to assess the explanatory power of different macroeconomic, government and financial variables. Our results show that structural balances and the existence of a default in the last ten years were the least significant variables whereas the level of net debt, budget balances, GDP per capita and the existence of a default in the last five years were found to be the most relevant variables explaining rating mismatches across agencies. For speculative-grade ratings, we also find that a default in the last two or five years decreases the rating difference between S&P and Fitch. For the positive rating difference between S&P and Moody’s for investment-grade ratings, an increase in external debt leads to a smaller rating gap between the two agencies

Keywords: sovereign ratings; split ratings; panel data; random effects ordered probit (search for similar items in EconPapers)
JEL-codes: C23 C25 E44 F34 G15 H63 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-fmk and nep-mac
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Journal Article: Sovereign Credit Rating Mismatches (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp022017

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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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