Analysis of determinants influencing the credit ratings of European Union countries

Abstract

The process of evaluating a country's risk involves numerous intricate factors that must be examined and considered prior to determining the ultimate credit rating. This paper will examine the pertinent factors that are taken into account when assessing an EU member state's creditworthiness. Some of the most significant factors considered when generating a credit rating evaluation include GDP growth, GDP per capita, inflation, governmental debt, and past performance in paying financial obligations. Examining the role of credit rating agencies and their evaluations in the economy, with a particular emphasis on the EU market and regulatory structure as well as the financial crisis of 2007, is crucial for gaining a deeper comprehension of the research. The empirical part of the paper looks into the connection between factors within certain nations and the credit ratings they are given. The paper aims to ascertain the significance of these determinants in EU member states as well as any potential variations in the relative relevance of particular determinants. It will be investigated whether and to what degree determinants affect country credit ratings using the multiple regression analysis method. In the end, a determination on the significance and relationship of factors to the assignment of credit rating assessments will be made on the basis of the analysis performed. The analysis's anticipated outcomes ought to be significant from an economic standpoint. The coefficient of multiple determination will enable comparisons between each nation, enabling an evaluation of the results' representativeness.