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Sovereign Credit Rating Mismatches

Author

Listed:
  • António Afonso

    (ISEG-UL and REM - Research Unit on Complexity and Economics)

  • André Albuquerque

    (ISEG-UL)

Abstract

We study the factors behind ratings mismatches in sovereign credit ratings from different agencies, for the period 1980-2015. Using random effects ordered and simple probit approaches, we find that structural balances and the existence of a default in the last ten years were the least significant variables. In addition, the level of net debt, budget balances, GDP per capita and the existence of a default in the last five years were found to be the most relevant variables for rating mismatches across agencies. For speculative-grade ratings, a default in the last two or five years decreases the rating difference between S&P and Fitch. For the positive rating difference between S&P and Moody’s, and for investment-grade ratings, an increase in external debt leads to a smaller rating gap between the two agencies.

Suggested Citation

  • António Afonso & André Albuquerque, 2018. "Sovereign Credit Rating Mismatches," Notas Económicas, Faculty of Economics, University of Coimbra, issue 46, pages 49-70, July.
    • Handle: RePEc:gmf:journl:y:2017:i:45:p:49:70
    DOI: 10.14195/2183-203X_46_3
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    More about this item

    Keywords

    sovereign ratings; split ratings; panel data; random effects ordered probit.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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