Analysis of factors used by credit rating agencies in rating evaluations: Turkey's example

The credit rating agencies aim to minimize the information asymmetry problem between the lenders and borrowers in the financial markets. Sovereign credit ratings determined by the credit rating agencies are evaluated as an indicator of sovereigns' capacity and willingness to meet their financial obligations, in other words they are seen as their credit risk by the international investors. In this framework, credit ratings play a central role in sovereigns' access to international financial markets and the terms of that access. Achieving investment grade status not only lowers financing costs for the sovereign and corporates in the international capital market as the access is constrained by the sovereign rating, it also expands the pool of potential investors. In this perspective, identifying the main determinants for the countries to achieve investment grade status carries significance for designing the appropriate macroeconomic policies. Turkey achieved investment grade status from Fitch in 2012 followed by Moody's in 2013. In our study, for Turkey, the main factors of achieving the investment grade status after the 1994 crisis, around 20 years will be analyzed with the help of econometric techniques.