Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154444
Authors: 
Brůha, Jan
Karber, Moritz
Pierluigi, Beatrice
Setzer, Ralph
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2011
Abstract: 
This paper investigates the link between sovereign ratings and macroeconomic fundamentals for a group of euro area countries which recorded rating downgrades amid the euro area sovereign debt crisis. We apply an elaborated econometric estimation technique, based on a Bayesian ordered probit model, to understand how the decisions of rating agencies can be explained by economic developments. The estimated model re-produces historical ratings by using a small number of economic and institutional variables, which seem to effectively summarize the large number of criteria used by Moody’s, Standard & Poor’s and Fitch in their assignment of sovereign ratings. Our results suggest that the size of the downgrades observed since the start of the sovereign crisis has been broadly in line with the deterioration of economic fundamentals for most countries.
Subjects: 
euro area crisis
panel probit model
sovereign debt
sovereign rating
JEL: 
C25
G24
H63
H68
Document Type: 
Working Paper

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