Abstract
This paper investigates empirically the behavior of Credit Rating Agencies (CRAs) when assessing
sovereign solvency for European countries. Using Probit regressions I find that even after controlling
for macroeconomic factors, CRAs take the business cycle into account. Also, there is a clear case of
path dependence in sovereign ratings. Additionally, it turns out that there seems to be a discrepancy
between upgrades and downgrades. These results are robust to a number of different specifications.
sovereign solvency for European countries. Using Probit regressions I find that even after controlling
for macroeconomic factors, CRAs take the business cycle into account. Also, there is a clear case of
path dependence in sovereign ratings. Additionally, it turns out that there seems to be a discrepancy
between upgrades and downgrades. These results are robust to a number of different specifications.
| Original language | English |
|---|---|
| Place of Publication | Maastricht |
| Publisher | Maastricht University, Graduate School of Business and Economics |
| DOIs | |
| Publication status | Published - 1 Jan 2014 |
Publication series
| Series | GSBE Research Memoranda |
|---|---|
| Number | 020 |
Cite this
Freitag, L. (2014). Procyclicality and path dependence of sovereign credit ratings: The example of Europe. Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 020 https://doi.org/10.26481/umagsb.2014020