Abstract
The aim of this paper is to study determinants of sovereign ratings of emerging countries. The ratings are analyzed with panel ordered probit model. The economic indicators are used and these variables of the countries are independent for the sovereign ratings. In this study we determined the effective factors on ratings and we check the effects of current account deficits, external debts, gross domestic product per capita, real exchange rates, inflations, unemployement and political qualities on sovereign ratings that are exported by three large rating agencies (S&P, Moodys and Fitch). This paper studies sovereign rating models of Moody's, Standard & Poor's (S&P) and Fitch to identify important determinants of sovereign ratings. The credit agencies are taking attention some economic and political indicators of the countries on their credit limits. Sovereign credit ratings plays an imperative role in the decision-making process of where and when to invest and determine the interest that is paid to investors for sovereign debt borrowings. This sovereign credit scoring probability is estimated with panel ordered probit model in our study.
Highlights
The creditworthiness is determined by credit rating agencies which are assessing the country’s risk of default by evaluating a broad range of elements
We identify the following detetminants of sovereign ratings with the external dept, inflation gross domestic product (GDP) per capita, GDP growth, real exchange rates, unemployement, current accaunt deficit they are found all statistically significant
This study investigated the many economic and social factors impact on the sovereign credit rating probabilities for emerging countries
Summary
The creditworthiness is determined by credit rating agencies which are assessing the country’s risk of default by evaluating a broad range of elements. In the recent studies the determinants of the credit ratings are shown with many fundamental variables such as per capita income, GDP, growth, inflation, external dept all significantly affects the rating agencies evaluations (such as: [1, 2, 6, 19]). These fundamental variables can explain the probability of the sovereign rates. Sovereign credit rates and data for the emerging countries and panel probit model is explained. Ordered probit model had been used in the study [13]
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