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Dependency between sovereign credit ratings and economic risk: Insight from Balkan countries

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  • Athari, Seyed Alireza
  • Kondoz, Mehmet
  • Kirikkaleli, Dervis

Abstract

This paper examines the time and frequency co-movement between sovereign credit ratings and economic risk for five Balkan countries, namely Bulgaria, Greece, Croatia, Romania, and Slovenia, during the 1999Q1 to 2018Q4 period. To the best of knowledge, this is the first study attempt to conduct this nexus. We measured the sovereign credit scores by using the ratings and outlooks of Standard & Poor's (S&P), Moody's, and Fitch Ratings. The empirical findings reveal that there is a one-way causality running from the sovereign credit ratings to economic risk in Bulgaria and Croatia in the long-term. Also, it shows that there is a feedback causality between sovereign credit ratings and economic risk in Greece, Romania, and Slovenia. Results are robust and similar from both the time and frequency domains causality techniques.

Suggested Citation

  • Athari, Seyed Alireza & Kondoz, Mehmet & Kirikkaleli, Dervis, 2021. "Dependency between sovereign credit ratings and economic risk: Insight from Balkan countries," Journal of Economics and Business, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:jebusi:v:116:y:2021:i:c:s0148619521000023
    DOI: 10.1016/j.jeconbus.2021.105984
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    More about this item

    Keywords

    Sovereign ratings; Economic risk; Time-domain causality; Frequency-domain causality; Balkan countries;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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