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Determinants of Sovereign Defaults: An examination of fundamental factors derived from credit ratings

Kalliomäki, Martin LU (2012) NEKM01 20121
Department of Economics
Abstract (Swedish)
Credit rating agencies have in recent literature been found to base their sovereign ratings on the same range of macroeconomic fundamentals. The purpose of this study is to find out whether these credit rating determinants are valid predictors when explaining actual defaults and not only affect the perceived creditworthiness of sovereigns. By studying a sample of 106 sovereign issuers in a logistic panel data framework this thesis finds that GDP per capita, economic growth and external debt works as determinants for actual sovereign defaults in addition to their role in determining credit ratings. The impact of the individual variables on the risk of default is also found to be in line with what is expected from earlier research and... (More)
Credit rating agencies have in recent literature been found to base their sovereign ratings on the same range of macroeconomic fundamentals. The purpose of this study is to find out whether these credit rating determinants are valid predictors when explaining actual defaults and not only affect the perceived creditworthiness of sovereigns. By studying a sample of 106 sovereign issuers in a logistic panel data framework this thesis finds that GDP per capita, economic growth and external debt works as determinants for actual sovereign defaults in addition to their role in determining credit ratings. The impact of the individual variables on the risk of default is also found to be in line with what is expected from earlier research and economic intuition. (Less)
Please use this url to cite or link to this publication:
author
Kalliomäki, Martin LU
supervisor
organization
course
NEKM01 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
Sovereign Defaults, Credit Ratings, Rating Determinants, Random Effects, Panel Data, Binary Choice, Logit
language
English
id
2338226
date added to LUP
2012-02-13 10:19:04
date last changed
2012-02-13 10:19:04
@misc{2338226,
  abstract     = {Credit rating agencies have in recent literature been found to base their sovereign ratings on the same range of macroeconomic fundamentals. The purpose of this study is to find out whether these credit rating determinants are valid predictors when explaining actual defaults and not only affect the perceived creditworthiness of sovereigns. By studying a sample of 106 sovereign issuers in a logistic panel data framework this thesis finds that GDP per capita, economic growth and external debt works as determinants for actual sovereign defaults in addition to their role in determining credit ratings. The impact of the individual variables on the risk of default is also found to be in line with what is expected from earlier research and economic intuition.},
  author       = {Kalliomäki, Martin},
  keyword      = {Sovereign Defaults,Credit Ratings,Rating Determinants,Random Effects,Panel Data,Binary Choice,Logit},
  language     = {eng},
  note         = {Student Paper},
  title        = {Determinants of Sovereign Defaults: An examination of fundamental factors derived from credit ratings},
  year         = {2012},
}