Do fiscal imbalances deteriorate sovereign debt ratings? Articles uri icon

authors

  • AFONSO, ANTONIO
  • BATISTA MAIA GOMES, PEDRO

publication date

  • February 2011

start page

  • 1123

end page

  • 1134

issue

  • 6

volume

  • 62

International Standard Serial Number (ISSN)

  • 0035-2764

Electronic International Standard Serial Number (EISSN)

  • 1950-6694

abstract

  • We use sovereign debt rating estimations from Afonso, Gomes and Rother [2009, 2011] for Fitch, Moody's, and Standard & Poor's, to assess to what extent the recent fiscal imbalances are being reflected on the sovereign debt notations. With macro and fiscal data up to 2009, and macro and fiscal projections up to 2012, we obtain the expected rating for several OECD countries. The answer to the title question is yes, but in a diverse way for each country. Our average model predictions point to a heterogeneous behaviour of rating agencies across countries