DETERMINANTS OF SOVEREIGN CREDIT RATINGS

EVIDENCE FROM CEE COUNTRIES

Abstract

The goal of this paper is investigating determinants of the sovereign credit ratings in Central and Eastern European countries (CEEC). Sovereign credit ratings are important to determine a country’s financial ability to meet its obligations. It is important to know which determinants affect sovereign credit ratings and consequently the conditions under which a country can borrow on the financial market. The analysis is made on the sample of 11 CEEC countries over a period of 17 years, from 2000 to 2016. The determinants of three main global credit agencies (Standard and Poors’s Rating Services, Moody’s and Fitch) have been investigated using the linear OLS method for unbalanced panel. The results of the analysis have shown that GDP growth, GDP per capita, inflation, unemployment, public debt to GDP and external debt to GDP variables play a major role in determining sovereign credit ratings.