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A Note on Causality between Debt and Sovereign Credit Ratings using Panel Tests

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  • Greenidge, Kevin
  • Drakes, Lisa
  • Craigwell, Roland

Abstract

This paper uses linear and nonlinear panel causality tests to empirically explore the direction of causality between external debt stocks and credit ratings for a group of developing countries over the period 1998 to 2008. The results indicate that for the vast majority of the countries in the panel, a bi-directional causal relationship between external debt and sovereign ratings is evident.

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File URL: http://mpra.ub.uni-muenchen.de/40931/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40931.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:40931

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Related research

Keywords: External public debt; sovereign ratings; panel data causality;

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  1. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
  2. David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 149-165, 03.
  3. Bissoondoyal-Bheenick, Emawtee, 2005. "An analysis of the determinants of sovereign ratings," Global Finance Journal, Elsevier, vol. 15(3), pages 251-280, February.
  4. António Afonso & Pedro Gomes & Philipp Rother, 2007. "What “hides” behind sovereign debt ratings?," Working Paper Series 711, European Central Bank.
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