Determinants of Sovereign Ratings in Emerging Countries with Panel Probit Analysis

Abstract

The aim of this paper is to study determinants of sovereign ratings of emerging countries. The ratings are analyzed with panel ordered probit model. The economic indicators are used and these variables of the countries are independent for the sovereign ratings. In this study we determined the effective factors on ratings and we check the effects of current account deficits, external debts, gross domestic product per capita, real exchange rates, inflations, unemployement and political qualities on sovereign ratings that are exported by three large rating agencies (S&P, Moodys and Fitch). This paper studies sovereign rating models of Moody s, Standard & Poor s (S&P) and Fitch to identify important determinants of sovereign ratings. The credit agencies are taking attention some economic and political indicators of the countries on their credit limits. Sovereign credit ratings plays an imperative role in the decision-making process of where and when to invest and determine the interest that is paid to investors for sovereign debt borrowings. This sovereign credit scoring probability is estimated with panel ordered probit model in our study.