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Determinants of Sovereign Credit Ratings in Emerging Markets

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  • Oluyomi A. Osobajo
  • Adeola E. Akintunde

Abstract

This study critically investigates the determinants of sovereign credit ratings in emerging markets, during 2001 to 2015. This was conducted in 20 emerging markets, using S&P and Moody ratings. Linear framework econometric approach with the use of pooled Ordinary Least Square regression method was adopted in the study. The explanatory power of the estimated models has a good performance across both rating agencies. The study reveals the importance of five macroeconomic variables in determining the sovereign credit rating of emerging markets. These variables are: gross domestic product per capital, inflation, government debt, reserves, and external debt. Also, world governance indicators, a proxy for qualitative/political variables, were found to be an essential determinant of rating.

Suggested Citation

  • Oluyomi A. Osobajo & Adeola E. Akintunde, 2019. "Determinants of Sovereign Credit Ratings in Emerging Markets," International Business Research, Canadian Center of Science and Education, vol. 12(5), pages 142-166, May.
    • Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:5:p:142-166
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    Cited by:

    1. Oliver Takawira & John W. Muteba Mwamba, 2022. "Sovereign Credit Ratings Analysis Using the Logistic Regression Model," Risks, MDPI, vol. 10(4), pages 1-24, March.
    2. Nelson R. Ramírez-Rondán & Renato M. Rojas-Rojas & Julio A. Villavicencio, 2022. "Do institutions mitigate the uncertainty effect on sovereign credit ratings?," Documentos de Trabajo / Working Papers 2022-514, Departamento de Economía - Pontificia Universidad Católica del Perú.
    3. Oliver Takawira & John W. Muteba Mwamba, 2020. "Determinants of Sovereign Credit Ratings: An Application of the Naïve Bayes Classifier," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(4), pages 279-299.

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    More about this item

    Keywords

    sovereign credit rating; credit rating; credit rating agency; emerging market;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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