engleski

Relationship between Country Credit Rating and Country Performance: A Data Envelopment Analysis Approach

Sovereign credit rating determines interest rate that is charged by international creditors to sovereign borrowers. Therefore, it represents a key factor in global investors’ decision making and thus it is important that ratings represent appropriate riskiness of the issuers. However, rating agencies grading systems are not transparent and key determinants of the rating are undefined. Still, a bunch of studies using statistical models have been conducted in order to define the key determinants, which resulted in defining (“guessing”) the wide list of ratings’ key determinants. The idea of this paper is to group selected determinants of credit ratings into two subsets i.e. inputs and outputs and using Data Envelopment Analyses (DEA) technique to categorize countries regarding their efficiency. The analyses will be done for a year before last financial crisis and for a recent period. Finally, our aim is to enable policy makers to benchmark country’s performance and to detect key variables that need to be improved to achieve higher credit rating.

sovereign credit ratings, country risk, data envelopment analysis

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