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A Note on Causality between Debt and Sovereign Credit Ratings using Panel Tests

Author

Listed:
  • Greenidge, Kevin
  • Drakes, Lisa
  • Craigwell, Roland

Abstract

This paper uses linear and nonlinear panel causality tests to empirically explore the direction of causality between external debt stocks and credit ratings for a group of developing countries over the period 1998 to 2008. The results indicate that for the vast majority of the countries in the panel, a bi-directional causal relationship between external debt and sovereign ratings is evident.

Suggested Citation

  • Greenidge, Kevin & Drakes, Lisa & Craigwell, Roland, 2011. "A Note on Causality between Debt and Sovereign Credit Ratings using Panel Tests," MPRA Paper 40931, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40931
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    File URL: https://mpra.ub.uni-muenchen.de/40931/1/MPRA_paper_40931.pdf
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    References listed on IDEAS

    as
    1. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    2. David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 149-165, March.
    3. Christophe Hurlin, 2004. "Testing Granger causality in Heterogeneous panel data models with fixed coefficients," Post-Print halshs-00257395, HAL.
    4. Bissoondoyal-Bheenick, Emawtee, 2005. "An analysis of the determinants of sovereign ratings," Global Finance Journal, Elsevier, vol. 15(3), pages 251-280, February.
    5. António Afonso & Pedro Gomes & Philipp Rother, 2006. "What “Hides” Behind Sovereign Debt Ratings?," Working Papers Department of Economics 2006/35, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    6. repec:dau:papers:123456789/6159 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    External public debt; sovereign ratings; panel data causality;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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