Abstract
Sovereign credit ratings have gained importance in financial markets. Sovereign ratings have the function of providing necessary information in a common language between market participants who need funds and investors. Sovereign credit ratings affect countries’ borrowing costs. Additionally, ıt affects the decisions of foreign investors and investment funds, to invest in the related country. In sovereign credit risk approaches, various data is used for assessment such as balance of payment, domestic economy indicators, external economy, financial sector status, income and population data, and public finance data. In the scope of this study, the relation between domestic economy indicators and the probability of default are investigated. The logistic regression method was used in the study. The Sovereign default data is analyzed and categorized. It was observed that GDP data, exchange rate, and consumer price growth rate are high explanatory variables that explain the probability of default. G20 countries were included in the study and examined between the years 2008-2017. As a result of the study, the increase in USD exchange rate and a decrease in the GDP in USD have been a factor that increases the probability of default for countries.
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