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Economic Policy Uncertainty and Sovereign Credit Rating Decisions: Panel Quantile Evidence for the Eurozone

Listed author(s):
  • Periklis Boumparis


    (University of Liverpool, UK)

  • Costas Milas


    (Management School, University of Liverpool, UK; The Rimini Centre for Economic Analysis)

  • Theodore Panagiotidis


    (Department of Economics, University of Macedonia, Greece; The Rimini Centre for Economic Analysis)

We employ a panel quantile framework that quantifies the relative importance of quantitative and qualitative factors across the conditional distribution of sovereign credit ratings in the Eurozone area. We find that regulatory quality and competitiveness have a stronger impact for low rated countries whereas GDP per capita is a major driver of high rated countries. A reduction in the current account deficit leads to a rating or outlook upgrade for low rated countries. Economic policy uncertainty impacts negatively on credit ratings across the conditional distribution; however, the impact is stronger for the lower rated countries. In other words, the creditworthiness of low rated countries takes a much bigger ‘hit’ than that of high rated countries when European policy uncertainty is on the rise.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 17-21.

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Date of creation: Aug 2017
Handle: RePEc:rim:rimwps:17-21
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