Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233807 
Year of Publication: 
2021
Series/Report no.: 
EconPol Working Paper No. 62
Publisher: 
ifo Institute - Leibniz Institute for Economic Research at the University of Munich, Munich
Abstract: 
We link governments' spending efficiency scores, to sovereign debt assessments made by financial markets', more specifically by three rating agencies (Standard & Poors, Moody's and Fitch). Public efficiency scores are computed via data envelopment analysis. Then, we rely notably on ordered response models to estimate the response of sovereign ratings to changes in efficiency scores. Covering 34 OECD countries over the period 2007-2018, we find that increased public spending efficiency is rewarded by financial markets via higher sovereign debt ratings. In addition, higher inflation and government indebtedness lead to sovereign rating downgrades, while higher foreign reserves contribute to rating upgrades.
Subjects: 
government spending efficiency
DEA
panel analysis
ordered probit (logit)
sovereign ratings
rating agencies
JEL: 
C14
C23
E44
G15
H11
H50
Document Type: 
Working Paper

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