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Modelling sovereign debt ratings for sub-national governments: the case of Spain before and after the crisis

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  • Santiago José Pérez-Balsalobre

    (Universidad Autónoma de Madrid
    Universidad Autónoma de Madrid)

  • Carlos Llano-Verduras

    (Universidad Autónoma de Madrid
    Universidad Autónoma de Madrid)

Abstract

Since 2007, Europe has been living through one of its deepest crises in recent history. What began as financial turmoil has quickly become a public-debt crunch. In Spain, public debt rose from less than 40% of GDP in 2008 to nearly 100% of GDP in 2013. This shock has resulted in a deterioration of public-debt ratings. In Spain, as in many other countries, public debt is composed not only of the central government’s debt but also of debt issued by sub-national entities. Although the evolution of national ratings has received broad attention in the literature, few articles have dealt with sub-national entities. The purpose of this article is to shed new light on the structure and evolution of the public-debt ratings of Spain’s regional governments. Our main contribution rests on an analysis of recent changes in the main variables, before and after the crisis, and specifically of the sustainability of the 2012 debt reform and the structure of Spain’s public debt.

Suggested Citation

  • Santiago José Pérez-Balsalobre & Carlos Llano-Verduras, 2021. "Modelling sovereign debt ratings for sub-national governments: the case of Spain before and after the crisis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 373-395, May.
    • Handle: RePEc:kap:empiri:v:48:y:2021:i:2:d:10.1007_s10663-019-09470-5
    DOI: 10.1007/s10663-019-09470-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Regional public debt; Ratings; Sustainability; Economic crisis; Ordered probit models;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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