IDEAS home Printed from https://ideas.repec.org/a/brf/journl/v7y2009i1p73-106.html
   My bibliography  Save this article

Ratings of Sovereign Risk and the Macroeconomics Fundamentals of the countries: a Study Using Artificial Neural Networks

Author

Listed:
  • Bruno Ferreira Frascaroli

    (Universidade Federal de Pernambuco)

  • Luciano da Costa Silva

    (Universidade Federal da Paraíba)

  • Osvaldo Cândido da Silva Filho

    (Universidade Federal do Rio Grande do Sul)

Abstract

To minimize the consequences of asymmetric information, the sovereign risk ratings are instruments that constitute a key piece in the determination of credit market conditions, essential to the growth of developing countries like Brazil. In the present work we studied based on macroeconomics foundations, a classification to sovereign risk ratings realized by the ratings agencies finding the classification using Artificial Neural Networks. We observed homogeneity degree between the attributions of agencies and macroeconomics foundations in the countries of sample which four of foundations seem to be more directly connected with these attributions. After, in a comparative static exercise, we use the model to make simulations of sceneries of the credit external conditions for the Brazilian economy, changing the macroeconomics foundations which we noted that agencies expected for more per capita income increasing and decrease of public debt.

Suggested Citation

  • Bruno Ferreira Frascaroli & Luciano da Costa Silva & Osvaldo Cândido da Silva Filho, 2009. "Ratings of Sovereign Risk and the Macroeconomics Fundamentals of the countries: a Study Using Artificial Neural Networks," Brazilian Review of Finance, Brazilian Society of Finance, vol. 7(1), pages 73-106.
    • Handle: RePEc:brf:journl:v:7:y:2009:i:1:p:73-106
    as

    Download full text from publisher

    File URL: http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/download/1428/797
    Download Restriction: no
    File URL: http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/1428
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter Rowland, 2004. "Determinants Of Spread , Credit Rating And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," Borradores de Economia 2336, Banco de la Republica.
    2. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    3. Suk-Joong Kim & Eliza Wu, 2018. "Sovereign Credit Ratings, Capital Flows and Financial Sector Development in Emerging Markets," World Scientific Book Chapters, in: Information Spillovers and Market Integration in International Finance Empirical Analyses, chapter 13, pages 431-466, World Scientific Publishing Co. Pte. Ltd..
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    5. Carmen M. Reinhart, 2002. "An Introduction," The World Bank Economic Review, World Bank, vol. 16(2), pages 149-150, August.
    6. International Monetary Fund, 1998. "The Relative Importance of Political and Economic Variables in Creditworthiness Ratings," IMF Working Papers 1998/046, International Monetary Fund.
    7. Hooper, Vince & Hume, Timothy & Kim, Suk-Joong, 2008. "Sovereign rating changes--Do they provide new information for stock markets?," Economic Systems, Elsevier, vol. 32(2), pages 142-166, June.
    8. Peter Rowland, 2004. "Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis," Borradores de Economia 296, Banco de la Republica de Colombia.
    9. G. Ferri & L.-G. Liu & J. E. Stiglitz, 1999. "The Procyclical Role of Rating Agencies: Evidence from the East Asian Crisis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 335-355, November.
    10. Mora, Nada, 2006. "Sovereign credit ratings: Guilty beyond reasonable doubt?," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2041-2062, July.
    11. Arnott, Richard J & Stiglitz, Joseph E, 1988. " The Basic Analytics of Moral Hazard," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 383-413.
    12. Rosemarie Bröker Bone, 2005. "A Importância Dos Fundamentos Nos Ratings Soberanos Brasileiros, 1994-2002," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 037, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    13. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, vol. 2(Oct), pages 37-53.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Ferreira Frascaroli & Jailson Da Conceição Teixeira De Oliveira, 2014. "A Performance Das Agências De Ratings De Risco Soberano E Os Fundamentos Macroeconômicos Dos Países: Um Estudo Sobre As Atribuições De Risco," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 121, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Rosati, Nicoletta & Bellia, Mario & Matos, Pedro Verga & Oliveira, Vasco, 2020. "Ratings matter: Announcements in times of crisis and the dynamics of stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    3. Zoran Ivanovic & Sinisa Bogdan & Suzana Baresa, 2015. "Modeling and Estimating Shadow Sovereign Ratings," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.
    4. Baum, Christopher F. & Schäfer, Dorothea & Stephan, Andreas, 2016. "Credit rating agency downgrades and the Eurozone sovereign debt crises," Journal of Financial Stability, Elsevier, vol. 24(C), pages 117-131.
    5. P. Hammer & A. Kogan & M. Lejeune, 2011. "Reverse-engineering country risk ratings: a combinatorial non-recursive model," Annals of Operations Research, Springer, vol. 188(1), pages 185-213, August.
    6. Baum, Christopher & Karpava, Margarita & Schäfer, Dorothea & Stephan, Andreas, 2013. "Credit Rating Agency Announcements and the Eurozone Sovereign Debt Crises," Ratio Working Papers 224, The Ratio Institute.
    7. Luitel, Prabesh & Vanpée, Rosanne & De Moor, Lieven, 2016. "Pernicious effects: How the credit rating agencies disadvantage emerging markets," Research in International Business and Finance, Elsevier, vol. 38(C), pages 286-298.
    8. Ratha, Dilip & De, Prabal K. & Mohapatra, Sanket, 2011. "Shadow Sovereign Ratings for Unrated Developing Countries," World Development, Elsevier, vol. 39(3), pages 295-307, March.
    9. Abdulkerim Karaaslan & Kürşat Özgür Özden, 2017. "Forecasting Turkey’s Credit Ratings with Multivariate Grey Model and Grey Relational Analysis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(3), pages 583-610, September.
    10. Hammer, P.L. & Kogan, A. & Lejeune, M.A., 2006. "Modeling country risk ratings using partial orders," European Journal of Operational Research, Elsevier, vol. 175(2), pages 836-859, December.
    11. Amaresh Samantaraya & Jeanne Verrier, 2009. "Do Macroeconomic Indicators Explain India's Sovereign Ratings? An Empirical Analysis," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(3), pages 193-221, July.
    12. Zamira Oskonbaeva, 2020. "Determinants of credit ratings: evidence from panel discrete model," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 240-247.
    13. Yalta, A. Talha & Yalta, A. Yasemin, 2018. "Are credit rating agencies regionally biased?," Economic Systems, Elsevier, vol. 42(4), pages 682-694.
    14. El-Shagi, Makram & von Schweinitz, Gregor, 2017. "Why they keep missing: An empirical investigation of rational inattention of rating agencies," IWH Discussion Papers 1/2017, Halle Institute for Economic Research (IWH), revised 2017.
    15. Burhan Kabadayi & Ahmet Alkan elik, 2015. "Determinants of Sovereign Ratings in Emerging Countries: A Qualitative, Dependent Variable Panel Data Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 656-662.
    16. Martín Grandes, 2007. "The Determinants of Sovereign Bond Spreads: Theory and Facts From Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(130), pages 151-181.
    17. A. Talha Yalta & Yasemin Yalta, 2018. "Are the Credit Rating Agencies Biased Against MENA Countries?," Working Papers 1274, Economic Research Forum, revised 19 Dec 2018.
    18. Erdem, Orhan & Varli, Yusuf, 2014. "Understanding the sovereign credit ratings of emerging markets," Emerging Markets Review, Elsevier, vol. 20(C), pages 42-57.
    19. El-Shagi, Makram & Schweinitz, Gregor von, 2018. "The joint dynamics of sovereign ratings and government bond yields," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 198-218.
    20. Broto, Carmen & Molina, Luis, 2016. "Sovereign ratings and their asymmetric response to fundamentals," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 206-224.

    More about this item

    Keywords

    sovereign risk rating; macroeconomics foundations; arti cial neural networks.;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:brf:journl:v:7:y:2009:i:1:p:73-106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marcio Laurini (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.