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Is the UK triple-A?

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  • Wickens, Michael R.
  • Polito, Vito

Abstract

The immediate background to this paper is the downgrade of the U.K.'s credit rating in February 2013, the market's view that this should have occurred earlier and the emphasis in fiscal policy on reducing debt rather than recovery from recession. We propose a measure of the U.K. sovereign credit rating based on an open economy macroeconomic model that is simple to compute and easily automated. Whether based on an ad hoc debt-GDP limit or a DSGE model of an open economy, our measure downgrades the U.K.'s sovereign credit rating from the middle of 2008. From 2010 the rating improves and is nearly restored to triple-A by 2012.

Suggested Citation

  • Wickens, Michael R. & Polito, Vito, 2013. "Is the UK triple-A?," CEPR Discussion Papers 9378, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9378
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    References listed on IDEAS

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    Cited by:

    1. Polito, Vito & Wickens, Michael, 2014. "How the Euro Crisis Evolved and how to Avoid Another: EMU, Fiscal Policy and Credit Ratings," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 364-374.

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    More about this item

    Keywords

    Credit ratings; Debt default;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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