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Determinants of credit ratings, sovereign bond spreads and real interest rates in emerging markets

Author

Listed:
  • Saygın ŞAHİNÖZ

    (TCMB)

  • Rauf GÖNENÇ

    (OECD)

Abstract

The purpose of this paper is to examine the determinants of credit ratings, sovereign spreads and real interest rates for emerging market economies. Using panel data on a sample of 18 emerging markets for the period 1998 to 2008, the cross-sectional and time series dimensions of sovereign spreads, ratings and real interest rates are exploited. The results suggest that emerging markets should increase their growth, decrease their public debt and maintain the stability of their political institutions in order to improve their standing in international capital markets. Institutional quality is found to have a strong influence on credit ratings, monetary policy seems to influence both credit ratings and real interest rates and external balance has a particularly significant bearing on bond spreads of emerging countries. Results also indicate that global forces play a major role in determining real interest rates and bond spreads.

Suggested Citation

  • Saygın ŞAHİNÖZ & Rauf GÖNENÇ, 2011. "Determinants of credit ratings, sovereign bond spreads and real interest rates in emerging markets," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(305), pages 09-35.
    • Handle: RePEc:iif:iifjrn:v:26:y:2011:i:305:p:09-35
    as

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    More about this item

    Keywords

    Credit Rating; Sovereign Spread; Real Interest Rate; Emerging Markets;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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