This paper proposes a new methodology for generating sovereign credit ratings. These are determined by mapping the probability that the debt-GDP ratio might exceed a maximum debt limit at some point in the future into a credit rating. The debt limit can be either ad hoc or based on the financial...

A methodology for generating sovereign credit ratings based on macroeconomic theory is proposed. This is applied to quarterly U.S. data from 1970 to 2011. Over this period the official credit rating of U.S. Treasury securities has been of the highest quality. In contrast, the model-based measure...