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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
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    References listed on IDEAS

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    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

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