Sovereign Credit Rating Determinants Under Financial Crises

Posted: 7 Mar 2019

See all articles by João C. A. Teixeira

João C. A. Teixeira

University of the Azores - School of Business and Economics

Francisco J. F. Silva

University of the Azores - Department of Economics and Business

Manuel Ferreira

University of the Azores - Department of Economics and Business

José António Cabral Vieira

University of the Azores - Department of Economics and Business; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2018

Abstract

This paper empirically examines the determinants of sovereign credit ratings using panel data on a sample of 86 countries for 1993–2013. It further investigates whether the countries' average credit rating differs by region and for crisis and noncrisis periods, and how the bursting of the dot-com bubble, the Asian crisis, and the 2008 international financial crisis affected the average rating of each region. The estimation results reveal that macroeconomic, external, government, and qualitative factors importantly affect sovereign credit ratings, and that average ratings differ across all geographical regions except for North America and the Eurozone. While the recent crisis reduced the average rating across all regions, the dot-com bubble burst had no effect, the Asian crisis affected only the average rating of Asian countries, and the downgrade resulting from the 2008 crisis was larger in the Eurozone.

Keywords: Sovereign credit ratings, Sovereign debt, Financial crises, Ordered probit model

JEL Classification: G01, G24

Suggested Citation

Teixeira, João C. A. and Silva, Francisco J. F. and Ferreira, Manuel and Cabral Vieira, José António, Sovereign Credit Rating Determinants Under Financial Crises (May 1, 2018). Global Finance Journal, Vol. 36, 1-13, May 2018, Available at SSRN: https://ssrn.com/abstract=3335761

João C. A. Teixeira (Contact Author)

University of the Azores - School of Business and Economics ( email )

Rua Mãe de Deus, s/n
9501-801 Ponta Delgada Azores
Portugal

Francisco J. F. Silva

University of the Azores - Department of Economics and Business ( email )

9501-801 Ponta Delgada Azores
Portugal

Manuel Ferreira

University of the Azores - Department of Economics and Business ( email )

9501-801 Ponta Delgada Azores
Portugal

José António Cabral Vieira

University of the Azores - Department of Economics and Business ( email )

9501-801 Ponta Delgada Azores
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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