Determinants of Estonian Sovereign Credit Rating
The paper focuses on sovereign credit ratings assigned to Estonia and analyses their possible determinants. The first chapter gives an overview of different rating agencies and the methodology they use in rating process. Besides that the interpretation, comparability and explanatory power of different ratings are analysed. The chapter concludes with the description of Estonian rating history. The second chapter analyses the possible determinants of Estonian rating. Firstly, the possible problems in analysing the determinants are discussed. Secondly, the factors that have been seen as important determinants of ratings in theoretical literature or previous empirical researches are presented. The third chapter analyses empirically the determinants of Estonian credit rating. For this purpose, Estonia is analysed in the context of three country groups: former socialist countries, developed European countries and countries having similar ratings. Also the factors that different rating agencies have pointed out in their reports about Estonia are compared with the empirical results. The chapter concludes with the comparison of the results of the analysis and SWOT analysis. The results of the paper show that the most critical factors for Estonia that can constrain possible rating upgrade in the future are low nominal level of per capita GDP, high unemployment rate and high CA deficit. At the same time it should be looked after that other important indicators that have a strong relation with rating (such as inflation, fiscal balance, foreign debt level and speed of transition and EU accession) are kept under control.
|Date of creation:||12 Oct 2001|
|Date of revision:||12 Oct 2001|
|Contact details of provider:|| Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA|
Web page: http://www.bankofestonia.info
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|Order Information:|| Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA|
References listed on IDEAS
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Federal Reserve Bank of New York, issue Oct, pages 37-53.
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- Christian B. Mulder & Brieuc Monfort, 2000. "Using Credit Ratings for Capital Requirementson Lending to Emerging Market Economies: Possible Impact of a New Basel Accord," IMF Working Papers 00/69, International Monetary Fund.
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