Sovereign Credit Rating in Ordered Response Model Framework – Case of Visegrad Four Countries

European Financial Systems 2014, Proceedings of the 11th International Scientific Conference, Brno: Masaryk University, 2014, pp. 11-17. ISBN 978-80-210-7153-7

7 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

Date Written: May 2014

Abstract

The aim of this paper is to study the determinants of sovereign credit rating from the four major agencies – Moody’s, S&P, Fitch and R&I. The dataset is formed by the Visegrad Four countries in the period 1993-2012. The influence of EU and Eurozone membership is analysed in addition to the macroeconomic and the socio-political explanatory variables. Ordered probit model is used to estimate the parameters and to identify the relevant determinants of sovereign rating. Country heterogeneity not captured by the explanatory variables is modelled using fixed effects. The findings are confronted with our previous research using linear model. Results suggest that the main determinants are inflation, unemployment, import to export ratio, openness of the economy, real effective exchange rate growth, government gross debt and voice and accountability score (of World Bank Governance index). Both EU and EMU membership dummy variables are also significant.

Keywords: sovereign rating, Visegrad Four countries, panel data, ordered probit

JEL Classification: F30, G15, G24

Suggested Citation

Alexy, Martin and Kacer, Marek, Sovereign Credit Rating in Ordered Response Model Framework – Case of Visegrad Four Countries (May 2014). European Financial Systems 2014, Proceedings of the 11th International Scientific Conference, Brno: Masaryk University, 2014, pp. 11-17. ISBN 978-80-210-7153-7. Available at SSRN: https://ssrn.com/abstract=2584981

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

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