Understanding the Determinants of Government Debt Ratings: Evidence for the Two Leading Agencies

Antonio Afonso

No 2002/02, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: I conduct an analysis of the possible determinants of sovereign credit ratings assigned by the two leading credit rating agencies, Moody's and Standard and Poor's, by using both a linear and a logistic transformation of the rating scales. Of the large number of variables that can be used, the set of explanatory variables selected in this study is significant in explaining the credit ratings. Namely, six variables appear to be the most relevant to determine a country's credit rating: GDP per capita, external debt, level of economic development, default history, real growth rate and inflation rate.

Keywords: Credit ratings; sovereign debt (search for similar items in EconPapers)
JEL-codes: C21 G15 (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (30)

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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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