Sovereign Credit Ratings in the European Union: A Model-Based Fiscal Analysis
44 Pages Posted: 30 Sep 2013
Date Written: September 2013
Abstract
We propose a model-based measure of sovereign credit ratings derived solely from the fiscal position of a country: a forecast of its future debt liabilities, and its potential to use tax policy to repay these. We use this measure to calculate credit ratings for fourteen European countries over the period 1995-2012. This measure identifies a European sovereign debt crisis almost two years before the official ratings of the credit rating agencies.
Keywords: credit risk, default probability, fiscal policy, sovereign risk
JEL Classification: E62, H30, H60
Suggested Citation: Suggested Citation
Polito, Vito and Wickens, Michael and Wickens, Michael, Sovereign Credit Ratings in the European Union: A Model-Based Fiscal Analysis (September 2013). CEPR Discussion Paper No. DP9665, Available at SSRN: https://ssrn.com/abstract=2333582
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