Sovereign Credit Rating Determinants Under Financial Crises

This paper empirically examines the determinants of sovereign credit ratings using panel data on a sample of 86 countries for 1993–2013. It further investigates whether the countries' average credit rating differs by region and for crisis and noncrisis periods, and how the bursting of the dot-com bubble, the Asian crisis, and the 2008 international financial crisis affected the average rating of each region. The estimation results reveal that macroeconomic, external, government, and qualitative factors importantly affect sovereign credit ratings, and that average ratings differ across all geographical regions except for North America and the Eurozone. While the recent crisis reduced the average rating across all regions, the dot-com bubble burst had no effect, the Asian crisis affected only the average rating of Asian countries, and the downgrade resulting from the 2008 crisis was larger in the Eurozone