Modelling the information content of sovereign credit ratings PDF Download

Author: Maria de Lourdes Trevino Villarreal
Publisher:
ISBN:
Category :
Languages : en
Pages : 678

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Author: Vito Polito
Publisher:
ISBN:
Category : Credit ratings
Languages : en
Pages : 48

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Book Description

Author: Vito Polito
Publisher:
ISBN:
Category : Credit ratings
Languages : en
Pages : 0

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Book Description
A methodology for generating sovereign credit ratings based on macroeconomic theory is proposed. This is applied to quarterly U.S. data from 1970 to 2011. Over this period the official credit rating of U.S. Treasury securities has been of the highest quality. In contrast, the model-based measure finds that there are two clear instances in which the U.S. sovereign credit rating, if evaluated on the basis of economic fundamentals, should have been have been downgraded: the first oil crisis of the 1970s and in the aftermath of the Lehman collapse in 2008. This result is robust to several alternative views on the maximum borrowing capacity of the U.S. economy.

Author: Jaime Gil Aluja
Publisher: World Scientific
ISBN: 9814415774
Category : Business & Economics
Languages : en
Pages : 471

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Book Description
This book contains a selection of the papers presented at the XVII SIGEF Congress. It presents fuzzy logic, neural networks and other intelligent techniques applied to economic and business problems. This book is very useful for researchers and graduate students aiming to introduce themselves to the field of quantitative techniques for overcoming uncertain environments. The contributors are experienced scholars of different countries who offer real world applications of these mathematical techniques.

Author: Zoran Ivanovic
Publisher:
ISBN:
Category :
Languages : en
Pages : 18

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This paper describes and evaluates “shadow” sovereign credit ratings, which represent the credit ratings of countries that are not rated by credit rating agencies. Credit ratings represent the creditworthiness of companies or governments. They are important in attracting foreign capital. Countries without credit ratings can face greater difficulties than countries with low credit ratings, for example paying a higher price for capital. This paper has two objectives. The primary objective of this paper was to estimate a rating prediction model to the assess credit ratings of countries that are not yet rated. Large numbers of potential determinants were tested, and nine variables were selected that play a key role in assessing credit ratings. According to the chosen determinants, a highly precise model was calculated (80% of the estimated ratings were identical to the corresponding actual ratings or only one notch different). The purpose of this analysis was to estimate credit ratings for a sample of 31 unrated countries. The results are statistically significant and explained in detail. The second objective of this paper was to demonstrate that countries that are not ranked would not necessarily receive the lowest rating, and the results supported that hypothesis.

Author: Zsófia Barta
Publisher: Oxford University Press
ISBN: 0198878176
Category :
Languages : en
Pages : 225

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How do countries' political and policy choices affect the credit ratings they receive? Sovereign ratings influence countries' cost of funding, and observers have long worried that rating agencies - these unelected, unappointed, unaccountable, for-profit organizations - can interfere with democratic sovereignty if they assign lower ratings to certain political and policy choices. The questions of whether, how, and why ratings react to policy and politics, however, remain unexplored. Rating Politics opens the black box of sovereign ratings to uncover the logic that drives rating responses to political and policy factors. Relying on statistical analysis of rating scores, interviews with sovereign rating analysts, and a close reading of the official communications of rating agencies about their decisions, Zsófia Barta and Alison Johnston show that ratings penalize center-left governments and many (though not all) policies associated with the center-left agenda. The motivation for such penalties is not rooted in assumptions about how those political and policy features affect growth and debt servicing capacity. Instead, ratings are lower in the presence of those features because they are expected to make a country more vulnerable to market panics whenever the economy is hit by unforeseen shocks, as they signal insufficient willingness and/or ability to engage in determined austerity for the sake of reassuring markets. Since market panics and the resulting "sudden stops" of funding lead to humiliating collapses of ratings, rating agencies attempt to insure themselves against "rating failures" by pre-emptively assigning lower ratings to countries with the "wrong" political and policy mix.

Author: Metodij Hadzi-Vaskov
Publisher: International Monetary Fund
ISBN: 1513509012
Category : Business & Economics
Languages : en
Pages : 37

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Book Description
This study investigates the nonlinear relationship between public debt and sovereign credit ratings, using a wide sample of over one hundred advanced, emerging, and developing economies. It finds that: i) higher public debt lowers the probability of being placed in a higher rating category; ii) the negative debt-ratings relationship is nonlinear and depends on the rating grade itself; and iii) the identified nonlinearity explains the differential impact of debt on ratings in advanced economies versus in emerging markets and developing economies. These results hold for both gross debt and net debt, and are robust to alternative dependent variable definitions, analytical techniques, and empirical specifications. These findings underscore the potential for fiscal consolidation in helping countries achieve a better credit rating.

Author:
Publisher:
ISBN:
Category : Credit ratings
Languages : en
Pages : 35

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Author: Michael Frenkel
Publisher: Springer Science & Business Media
ISBN: 9783540222484
Category : Business & Economics
Languages : en
Pages : 276

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Book Description
Sovereign risk and financial crises play a key role in current international economic developments, particularly in the case of economic downturns. As the Asian economic crisis in the late 1990s revealed once again, financial crises are the rule rather than the exception in capitalist economies. The event also revealed that international public debt agreements are contingent claims. In a world of increasing economic interdependencies, the issues of financial crises and country defaults are of critical importance. This volume goes to the heart of the academic discussion on sovereign risk and financial crises by centering on quantitative-empirical aspects, evaluating prominent approaches, and by proposing new methods. Part I of the volume identifies key factors and processes that are central in analyzing sovereign risk while Part II focuses on the determinants and effects of financial crises.

Author: Jack Chao Yang
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
The study aims to quantitatively assess the extent to which sovereign ratings could be explained by a set of economic variables. A wide variety of factors could potentially bias a credit rating agency s decision. The analysis begins with replicating the results found in a seminal analysis by Cantor and Packer (1996). This analysis expanded by including more countries, dynamic over time and time lags. Multiple complementary statistical models and a Random Forest model are explored in this study. To ensure robustness of the model, out-sample-testing is applied. The results show that GNI per capita, GDP growth, total debt to GDP, inflation rate, default amount, default indicator, HDI, change in HDI and IMF indicator are statistically significant. It is observed that current account to GDP, GDP growth and inflation rate have a time-lagged effect on sovereign ratings. A further analysis by separating between developing and developed countries using the IMF indicator suggests that there is a discrepancy between developing countries ratings and developed country ratings. The model results also support the existence of subjective decisions or adjustments in sovereign risk assessment.