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Public Debt & Sovereign Ratings - Do Industrialized Countries Enjoy a Privilege?

Author

Listed:
  • Bernd Bartels

    (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)

  • Constantin Weiser

    (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)

Abstract

In this paper, we explore the institutional investors' assessment of relative creditworthiness across selected country groups with a special focus on the impact of public debt on the perception of sovereign risk. Our results show that general government debt is among the most important determinants of credit risk in industrialized countries and emerging markets alike. When using a multivariate framework, we further find that the inuence of debt on ratings do es not differ between both groups. Also, our results point towards a rating penalty for highly-indebted advanced countries when their debt ratio is associated with a growing one. By contrast, a high debt level alone does not lead to an additional rating decline. Finally, we show that peripheral euro area economies (GIIPS) received a rating privilege before the financial crisis that turned into a penalty after 2008.

Suggested Citation

  • Bernd Bartels & Constantin Weiser, 2014. "Public Debt & Sovereign Ratings - Do Industrialized Countries Enjoy a Privilege?," Working Papers 1417, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Nov 2014.
    • Handle: RePEc:jgu:wpaper:1417
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Sovereign Risk; Public Debt; European Monetary Union; Debt Sustainability;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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