Determinants and Impact of Sovereign Credit Ratings

18 Pages Posted: 11 Nov 2007

See all articles by Richard Cantor

Richard Cantor

Moody's Investors Service

Frank Packer

Bank for International Settlements (BIS)

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

Cantor, Richard Martin and Packer, Frank, Determinants and Impact of Sovereign Credit Ratings (October 1996). Available at SSRN: or

Richard Martin Cantor (Contact Author)

Moody's Investors Service ( email )

99 Church Street
New York, NY 10007
United States

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
4161 280 8449 (Phone)

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