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Determinants of Investment Grade Status in Emerging Markets

  • Laura Jaramillo
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    Emerging market countries seek investment grade status to lower financing costs for the sovereign, expand the pool of potential investors to institutional investors, and allow corporates the possibility of reducing their borrowing costs. Using a random effects binomial logit model on a sample of 48 emerging markets, the paper finds that, to a large extent, investment grade rating assignments can be explained by a handful of variables. The results also suggest that efforts by emerging markets to increase the likelihood of an upgrade should focus on debt indicators rather than the other key determinants of investment grade status.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/117.

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    Length: 21
    Date of creation: 01 May 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/117
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    1. Peter Rowland, 2004. "Determinants Of Spread , Credit Rating And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," BORRADORES DE ECONOMIA 002336, BANCO DE LA REPÚBLICA.
    2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, June.
    3. Antonio Afonso, 2003. "Understanding the determinants of sovereign debt ratings: Evidence for the two leading agencies," Journal of Economics and Finance, Springer, vol. 27(1), pages 56-74, March.
    4. António Afonso & Pedro Gomes & Philipp Rother, 2006. "What “Hides” Behind Sovereign Debt Ratings?," Working Papers Department of Economics 2006/35, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    5. Peter Rowland & José Luis Torres Trespalacios, 2004. "Determinants Of Spread And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," BORRADORES DE ECONOMIA 002337, BANCO DE LA REPÚBLICA.
    6. Eduardo Borensztein & Patricio Valenzuela & Kevin Cowan, 2007. "Sovereign Ceilings “Lite� The Impact of Sovereign Ratings on Corporate Ratings in Emerging Market Economies," IMF Working Papers 07/75, International Monetary Fund.
    7. Roberto Perrelli & Christian B. Mulder, 2001. "Foreign Currency Credit Ratings for Emerging Market Economies," IMF Working Papers 01/191, International Monetary Fund.
    8. Constantin Mellios & Eric Paget-Blanc, 2006. "Which factors determine sovereign credit ratings?," The European Journal of Finance, Taylor & Francis Journals, vol. 12(4), pages 361-377.
    9. Archer, Candace C. & Biglaiser, Glen & DeRouen, Karl, 2007. "Sovereign Bonds and the : Does Regime Type Affect Credit Rating Agency Ratings in the Developing World?," International Organization, Cambridge University Press, vol. 61(02), pages 341-365, April.
    10. António Afonso, 2002. "Understanding the Determinants of Government Debt Ratings: Evidence for the Two Leading Agencies," Working Papers Department of Economics 2002/02, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
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