Understanding the Determinants of Government Debt Ratings: Evidence for the Two Leading Agencies

I conduct an analysis of the possible determinants of sovereign credit ratings assigned by the two leading credit rating agencies, Moody's and Stan dard and Poor's, by using both a linear and a logistic transformation of the rating scales. Of the large number of variables that can be used, the set of explanatory variables selected in this study is significant in explaining the credit ratings. Namely, six variables appear to be the most relevant to determine a country's credit rating: GDP per capita, external debt, level of economic development, default history, real growth rate and inflation rate.