How Different are the Factors Affecting the Credit Ratings of Developed and Emerging Countries?

Doruk Küçüksaraç and Murat Duran (murat.duran@tcmb.gov.tr)

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] The credit rating agencies have been criticized after the global financial crisis over their rating procedure and their inability to foresee the financial crisis. Another criticism against the credit rating agencies has been the possibility of a negative bias towards emerging countries. In that sense, this study explores the determinants of credit ratings for developed and emerging countries separately and attempts to find out whether the effects of the determinants differ across developed and emerging countries using pooled panel regressions. In addition, the study aims to figure out whether there is a bias against emerging countries. The results indicate that GDP growth, government debt, GDP volatility and inflation volatility matters the most for developed countries, given the level of economic development and the homogeneity of financial indicators across these countries. When it comes to the emerging countries effects of inflation, government debt, financial depth and GDP per capita are considerably higher. Additionally, emerging countries on average, receive 1.4 steps lower credit ratings than developed countries with similar macroeconomic indicators. When the same analysis is done using credit default swap (CDS) premiums as the dependent variable, to control for the model errors, the bias against emerging countries disappears. [TR] Kredi derecelendirme kuruluslari kuresel kriz sonrasi donemde, derecelendirme metotlari ve krizleri ongormedeki yetersizlikleri ile elestirilmektedir. Bir diger elestiri ise, bu kuruluslarin gelismekte olan ulkelere yonelik olumsuz yanliligina dairdir. Bu bakimdan, bu not panel regresyon modelleri kullanarak gelismis ve gelismekte olan ulke kredi derecelerinin belirleyicilerini ve soz konusu belirleyicilerin gelismis ve gelismekte olan ulkeler icin farklilasip farklilasmadigini incelemektedir. Ayrica, not gelismekte olan ulkelere karsi negatif bir yanlilik olup olmadigini da test etmektedir. Sonuclar, gelismis ulkeler icin GSYH buyumesi, kamu borcu, GSYH buyume oynakligi ve enflasyon oynakliginin gelismis ulkeler arasinda daha belirleyici oldugunu gostermektedir. Bu durumda, ekonomik gelismislik ve finansal derinlik gibi degiskenler gelismis ulkeler icin goreli olarak birbirine yakin seviyelerde olmasinin etkili oldugu dusunulmektedir. Gelismekte olan ulkeler icin ise, enflasyon, kamu borcu, finansal derinlik ve kisi basi gelir seviyesinin kredi derecesi uzerinde etkili oldugu bulunmustur. Ek olarak, sonuclar gelismekte olan ulkelerin benzer ekonomik temellere sahip gelismis ulkelere gore ortalama 1,4 basamak daha dusuk kredi derecesi aldiklarini ortaya koymaktadir. Ayni modeller, model hatalarini kontrol etmek amaciyla piyasa bazli bir risk primi gostergesi olan CDS primleri uzerine de uygulanmistir. Analiz tekrarlandiginda, gelismis ulkelere yonelik negatif yanliligin ortadan kalktigi gozlenmektedir.

Date: 2016
New Economics Papers: this item is included in nep-cwa
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