Early-Warning and Risk Prevention of Sovereign Credit Rating Downgrades -- Empirical Test from 35 Country Panel Data

Yixiang Tian, Chenggang Li, Liucun Lu

Abstract


European debt crisis has seriously affected the global economy, and sovereign credit rating downgrades further affect a country’s debt crisis and a country’s as well as the global economy. Through the establishment of the panel data Logit model, combined with the 35 country panel data, this paper does an early warning of sovereign credit rating downgrades, analyzes the impact of various factors on the sovereign credit rating downgrades. The results of early warning show that, external debt, short-term non-normal substantial growth of budget deficit will increase the possibility of sovereign credit rating downgrades and government efficiency, and the impact of external debt is larger than budget deficit. The government efficiency, per capita GDP, the short-term improvement of foreign exchange reserves will inhibit the reduction in rating downgrades and the per capita GDP inhibits better.

Key words: Sovereign credit ratings; Influencing factors; Panel Data Logit model; Early-warning analysis; Risk prevention


Keywords


Sovereign credit ratings; Influencing factors; Panel Data Logit model; Early-warning analysis; Risk prevention

References


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DOI: http://dx.doi.org/10.3968/j.mse.1913035X20120603.2194

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