18 Pages Posted: 11 Nov 2007
Date Written: October 1996
The authors conduct the first systematic analysis of the determinants and impact of the sovereign credit ratings assigned by the two leading U.S. agencies, Moody's Investor Services and Standard and Poor's. Of the large number of criteria used by the two agencies, six factors appear to play an important role in determining a country's credit rating: per capita income, GDP growth, inflation, external debt, level of economic development, and default history. In addition, the authors find that sovereign ratings influence market yields - particularly those on non-investment-grade issues - independently of any correlation with publicly available information.
Keywords: Sovereign credit ratings, Moody's Investor Services, S&P
JEL Classification: F34, G15
Suggested Citation: Suggested Citation
Cantor, Richard and Packer , Frank, Determinants and Impact of Sovereign Credit Ratings (October 1996). Economic Policy Review, Vol. 2, No. 2, October 1996. Available at SSRN: https://ssrn.com/abstract=1028774 or http://dx.doi.org/10.2139/ssrn.1028774
By Dirk Krueger