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Promotion and Relegation between Country Risk Classes as Maintained by Country Risk Rating Agencies

18 September 2013
Publication Type: Working Paper
Economic Theme: Public Finance
JEL Code: E6, F47

Credit rating agency assessments of sovereign risk bear weak statistical association with the quality of country policies. This paper demonstrates that where endogenous responses by policy makers to credit rating outcomes, and the degree of responsiveness of credit rating agencies to policy changes are accounted for, strong ssociations between policy quality and ratings should be present. The paper verifies these associations on panel data for 60 countries over the 1980-2013 period.

Series title: Working paper 376
1 September 2013
Journal: Procedia Economics and Finance
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