Visegrad Four Countries and Their Sovereign Credit Rating

32 Pages Posted: 27 Mar 2015

See all articles by Martin Alexy

Martin Alexy

University of Economics in Bratislava

Marek Kacer

University of Leeds - Credit Management Research Centre (CMRC); University of Leeds - Division of Accounting and Finance; University of Economics in Bratislava

Pavol Ochotnicky

University of Economics in Bratislava

Date Written: March 1, 2014

Abstract

In this paper we study the sovereign credit rating determinants of Visegrad Four countries in the period 1993-2012. The sovereign ratings in this study come from four major credit rating agencies namely Moody’s, S&P, Fitch and R&I. Besides macroeconomic and socio-political indicators we analyse influence of EU and EMU membership as an economic and geo-political variables. We use linear model with fixed effects and ordered probit model to estimate parameters and to identify relevant determinants of sovereign credit rating. Besides the economic variables inflation, unemployment, broad money to GDP, import to export, openness of the economy, government gross debt, primary balance and size of the government we found out that voice & accountability score of Worldwide Governance Indicators is suitable representative of socio-political situation. Both EU and EMU membership provide additional information to other explanatory variables. Unlike in other academic papers, the growth of GDP was not significant variable to explain the sovereign ratings. The government finance is the most influential determinant in the researched dataset. The findings suggest that there are some differences in the methodology of various credit rating agencies. Although they use the set of similar explanatory variables; they employ different weights and various combination of factors.

Keywords: sovereign rating, Visegrad Four, panel data

JEL Classification: F30, G15, G24

Suggested Citation

Alexy, Martin and Kacer, Marek and Ochotnicky, Pavol, Visegrad Four Countries and Their Sovereign Credit Rating (March 1, 2014). Available at SSRN: https://ssrn.com/abstract=2584978 or http://dx.doi.org/10.2139/ssrn.2584978

Martin Alexy (Contact Author)

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Marek Kacer

University of Leeds - Credit Management Research Centre (CMRC) ( email )

Leeds, LS2 9JT
United Kingdom

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Pavol Ochotnicky

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

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