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


[1] Afonso, A., & Rault, C. (2010). What Do We Really Know About Fiscal Sustainability in the EU? A Panel Data Diagnostic. Review of World Economics, 145(4), 731-755.

[2] Falcetti, Elisabetta (2006). Modelling Currency Crises in Emerging Markets: A Dynamic Probit Model with Unobserved Heterogeneity and Autocorrelated Errors. Oxford Bulletin of Economics and Statistics, 68(4), 445-471.

[3] Yiu, M., Ho, A., & Jin, L. (2009). Econometric Approach to Early Warnings of Vulnerability in the Banking System and Currency Markets for Hong Kong and other EMEAP Economies. Hong Kong Monetary Authority Working Papers.

[4] Aßmann, C. & Boysen-Hogrefe, J. (2009). A Bayesian Approach to Model-based Clustering for Panel Probit Models. Christian-Albrechts-University of Kiel Working Paper.

[5] Shi, Zhuxian, & Mou, Xiaoyun (2005). Study on Early Warning About China’s Foreign Exchange Risk. Journal of Finance Research, (7), 24-32.

[6] Zhang, Ran (2005). Using Logit Model to Predict the Default Probability of Bank Customers. Finance Teaching and Research, (4), 33-35.

[7] Feng, Zongxian, Xiang, Hongjin, & Ke, Konglin (2008). Early Warming of Export Anti-Dumping Applications: Based on Panel Data Logit Model. The Journal of World Economy, (9), 19-29.

[8] Lu, Yongyan, & Wang, Weiguo (2010). Financial Distress Prediction of Listed Companies Based on Panel Logit Model. Mathematics in Practice and Theory, 40(5),37-43.

[9] Tian, Yixiang, & Lu, Liucun. Short and Long Term Effect Tests on Influencing Factors of Sovereign Credit Rating and Relevant Countermeasures: Implications from Asymmetric Effect in Economic Impact Due to Rating Downgrade. China Soft Science, 27(12), 46-56.

[10] Tian, Yixiang (2011). The Econometrics of Financial Markets. Beijing: Chinese Market Press.

[11] Afonso, A., Gomes, P. & Rother, P. (2011). Short and Long-Run Determinants of Sovereign Debt Credit Ratings. International Journal of Finance and Economics, 16(1), 1-15.

[12] Hong, Lu (2007). The Determinants of Sovereign Debt Ratings. Doctoral Dissertation, University of International Business and Economics.

[13] Xu, Yiping, & Hong, Lu (2009). A Holistic Evolution Mode and Empirical Study Metropolitan Trunsportuxion System. Management Review, 21(7), 85-120.




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

Refbacks

  • There are currently no refbacks.


Copyright (c)



Share us to:   

Reminder

  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.


We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:
caooc@hotmail.com; mse@cscanada.net; mse@cscanada.org

 Articles published in Management Science and Engineering are licensed under Creative Commons Attribution 4.0 (CC-BY).

 MANAGEMENT SCIENCE AND ENGINEERING Editorial Office

Address:1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.

Telephone: 1-514-558 6138
Http://www.cscanada.net Http://www.cscanada.org

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures