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Assessment of the Macroeconomic Risk Analysis of International Credit Rating Agencies against the Principles of Soundness and Credibility

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  • Simon, József
  • Simon-András, Henrietta

Abstract

International credit rating agencies regularly (twice a year) assess the risk level of sovereign debt, and thus that of a given country. In order to identify risks, each credit rating agency has developed its own methodology to assess economic and public finance processes and identify the emerging risks. The evaluations carried out influence at the international level the financing possibilities of a given country and its conditions. The improving result of evaluations by international credit rating agencies has become one of the requirements for the success of economic policy. However, this can only be a realistic condition and a measure of success if the evaluation made is methodologically sound and the evaluations resulting from their consistent implementation are scientifically credible. This article describes in detail the evaluation methodology applied by the three major international credit rating agencies to evaluate the individual countries and sovereign debt. After presenting the general aspects, the article draws attention to the fact that the principles of objectivity, authenticity and methodological determination are enforced in practice in the evaluations of international credit rating agencies to a limited extent.

Suggested Citation

  • Simon, József & Simon-András, Henrietta, 2019. "Assessment of the Macroeconomic Risk Analysis of International Credit Rating Agencies against the Principles of Soundness and Credibility," Public Finance Quarterly, Corvinus University of Budapest, vol. 64(3), pages 337-349.
    • Handle: RePEc:pfq:journl:v:64:y:2019:i:3:p:337-349
    DOI: https://doi.org/10.35551/PFQ_2019_3_2
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    References listed on IDEAS

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    1. DeLong J. Bradford, 2011. "Economics in Crisis," The Economists' Voice, De Gruyter, vol. 8(2), pages 1-2, May.
    2. António Afonso & Pedro Gomes & Philipp Rother, 2011. "Short‐ and long‐run determinants of sovereign debt credit ratings," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(1), pages 1-15, January.
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    More about this item

    Keywords

    public debt; international credit rating agencies; evaluation methodology; objectivity; credibility;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other

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