Credit rating agencies and macroeconomics determinants of sovereign credit ratings: Panel data analysis

In this study, it is investigated whether there is a relation between sovereign credit rating determined by Credit Rating Agencies and macroeconomic variables or not. Within this framework, 105 countries graded by S&P, one of three well known Credit Rating Agencies, were analyzed by using Econometric Analysis Of Panel Data. Ordered Probit and Ordered Logit were used as an econometric estimation technique and the countries were categorized as low income and middle income countries and high income countries in the study. According to the estimation results, it was reached a conclusion that they, Per Capita Income, Growth Rate, Inflation Rate, Government Debt, Budget Balance, Current Account Balance, are significant macroeconomic variables in terms of determining sovereign credit rating for low income and middle income countries while they, Per Capita Income, Inflation Rate, Unemployment Rate, Government Debt, are significant macroeconomic variables in terms of determining sovereign credit rating for high income countries. On the other hand, it was reached a systematic relation between credit rating and neither Unemployment Rate for low income and middle income countries nor Growth Rate, Budget Balance, Current Account Balance for high income countries. In the analysis of 105 countries for all the common results of both estimation methods indicate that Per Capita Income, Inflation Rate, Budget Balance and Government Debt are key determinants of Sovereign Credit Rating.