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Shadow Sovereign Ratings

Author

Listed:
  • Otaviano Canuto
  • Sanket Mohapatra
  • Dilip Ratha

Abstract

Sovereign ratings are a necessary condition for countries to fully access international capital. Even if the sovereign government is not issuing bonds, the sovereign rating often acts as a ceiling for the private sector and can influence its international capital market access. However, 58 developing countries are still not rated by Standard and Poors, Moodys, and Fitch, the three international credit rating agencies. This premise presents an exercise to predict shadow sovereign ratings to estimate where unrated countries would lie on the credit spectrum if they were rated. Contrary to popular perception, unrated countries are not necessarily at the bottom of the rating spectrum.
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Suggested Citation

  • Otaviano Canuto & Sanket Mohapatra & Dilip Ratha, 2011. "Shadow Sovereign Ratings," World Bank Other Operational Studies 10080, The World Bank.
  • Handle: RePEc:wbk:wboper:10080
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    References listed on IDEAS

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    1. Alexander Lehmann, 2004. "Sovereign Credit Ratings and Private Capital Flows to Low‐income Countries," African Development Review, African Development Bank, vol. 16(2), pages 252-268.
    2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    3. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
    4. Carmen M. Reinhart, 2002. "An Introduction," World Bank Economic Review, World Bank Group, vol. 16(2), pages 149-150, August.
    5. Eduardo Borensztein & Patricio A 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.
    6. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
    7. Ashok Vir Bhatia, 2002. "Sovereign Credit Ratings Methodology; An Evaluation," IMF Working Papers 02/170, International Monetary Fund.
    8. Mora, Nada, 2006. "Sovereign credit ratings: Guilty beyond reasonable doubt?," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2041-2062, July.
    9. Ratha, Dilip & De, Prabal K. & Mohapatra, Sanket, 2011. "Shadow Sovereign Ratings for Unrated Developing Countries," World Development, Elsevier, vol. 39(3), pages 295-307, March.
    10. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
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    Cited by:

    1. repec:hal:journl:dumas-00903799 is not listed on IDEAS
    2. Ibrahim Sirkeci & Jeffrey H. Cohen & Dilip Ratha, 2012. "Migration and Remittances during the Global Financial Crisis and Beyond," World Bank Publications, The World Bank, number 13092, October.
    3. Aliu, Armando, 2012. "International Migration and the European Union Relations in the Context of a Comparison of Western Balkans and North African Countries: Controlling Migration and Hybrid Model," MPRA Paper 38931, University Library of Munich, Germany.
    4. Basu, Kaushik & De, Supriyo & Ratha, Dilip & Timmer, Hans, 2013. "Sovereign ratings in the post-crisis world : an analysis of actual, shadow and relative risk ratings," Policy Research Working Paper Series 6641, The World Bank.

    More about this item

    Keywords

    Finance and Financial Sector Development - Financial Intermediation Finance and Financial Sector Development - Debt Markets Private Sector Development - Emerging Markets Finance and Financial Sector Development - Currencies and Exchange Rates Finance and Financial Sector Development - Bankruptcy and Resolution of Financial Distress;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F3 - International Economics - - International Finance
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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