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Debt-threshold effect in sovereign credit ratings: New evidence from nonlinear panel smooth transition models

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  • Ben Hmiden, Oussama
  • Ben Cheikh, Nidhaleddine

Abstract

This paper formally tests the presence of threshold effect in sovereign credit ratings with respect to government debt level. As ad hoc methods have been used in the previous studies, we propose to implement a nonlinear panel smooth transition model where the appropriate debt-threshold value is estimated endogenously from the data. Our results reveal a strong regime-dependence in rating decisions, in the sense that the determinants of sovereign risk vary across different vulnerability levels.

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  • Ben Hmiden, Oussama & Ben Cheikh, Nidhaleddine, 2016. "Debt-threshold effect in sovereign credit ratings: New evidence from nonlinear panel smooth transition models," Finance Research Letters, Elsevier, vol. 19(C), pages 273-278.
    • Handle: RePEc:eee:finlet:v:19:y:2016:i:c:p:273-278
    DOI: 10.1016/j.frl.2016.09.001
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    References listed on IDEAS

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    1. Andreasen, Eugenia & Valenzuela, Patricio, 2016. "Financial openness, domestic financial development and credit ratings," Finance Research Letters, Elsevier, vol. 16(C), pages 11-18.
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    Cited by:

    1. Ben Lahouel, Béchir & Bruna, Maria-Giuseppina & Ben Zaied, Younes, 2020. "The curvilinear relationship between environmental performance and financial performance: An investigation of listed french firms using panel smooth transition model," Finance Research Letters, Elsevier, vol. 35(C).
    2. Nidhaleddine Ben Cheikh & Oussama Ben Hmiden & Younes Ben Zaied & Sabri Boubaker, 2021. "Do sovereign credit ratings matter for corporate credit ratings?," Annals of Operations Research, Springer, vol. 297(1), pages 77-114, February.

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    More about this item

    Keywords

    Sovereign credit ratings; Sovereign risk; Panel smooth transition regression models; Emerging markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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