Sovereign Credit Rating in Ordered Response Model Framework – Case of Visegrad Four Countries

The aim of this paper is to study the determinants of sovereign credit rating from the four major agencies – Moody's, S&P, Fitch and R&I. The dataset is formed by the Visegrad Four countries in the period 1993-2012. The influence of EU and Eurozone membership is analysed in addition to the macroeconomic and the socio-political explanatory variables. Ordered probit model is used to estimate the parameters and to identify the relevant determinants of sovereign rating. Country heterogeneity not captured by the explanatory variables is modelled using fixed effects. The findings are confronted with our previous research using linear model. Results suggest that the main determinants are inflation, unemployment, import to export ratio, openness of the economy, real effective exchange rate growth, government gross debt and voice and accountability score (of World Bank Governance index). Both EU and EMU membership dummy variables are also significant