engleski

Determinants of sovereign credit rating and credit rating agencies faults

Credit rating agencies are prominent actors on world financial market, as they make decisions on country’s credit rating which determines general investment climate and influences economic progress and general economic stability of a country. The aim of this paper is to determine key factors in defining country’s credit rating in the period before crisis and to show that credit rating agencies were neglecting some important factors. Using discriminant analysis, this paper examines the characteristics of the countries with higher and lower credit rating and concludes that the key factors in distinguishing these two groups were GDP per capita, GDP growth rate, inflation rate and the ratio of international reserves to imports, while the ratio of current account balance to GDP and external debt to GDP were found to be statistically insignificant. Negligence of the external debt to GDP was an enormous fault of agencies, which consequences are visible today.

sovereign credit ratings; credit rating agencies; failed ratings; discriminant analysis

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