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Short‐ and long‐run determinants of sovereign debt credit ratings
Author(s) -
Afonso António,
Gomes Pedro,
Rother Philipp
Publication year - 2011
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.416
Subject(s) - economics , sovereign credit , monetary economics , credit rating , debt , government debt , real gross domestic product , external debt , sovereign default , short run , per capita , government (linguistics) , financial system , sovereignty , fiscal policy , macroeconomics , sovereign debt , credit risk , finance , credit default swap , population , philosophy , law , linguistics , sociology , political science , demography , politics
We study the determinants of sovereign debt ratings from the three main rating agencies, for the period 1995–2005. Using linear and ordered response models, we employ a specification that allows us to distinguish between short‐ and long‐run effects, on a country's rating, of macroeconomic and fiscal variables. Changes in GDP per capita, GDP growth, government debt, and government balance have a short‐run impact on a country's credit rating, while government effectiveness, external debt, foreign reserves, and default history are important long‐run determinants. Copyright © 2010 John Wiley & Sons, Ltd.