State dependence and stickiness of sovereign credit ratings:evidence from a panel of countries

Dimitrakopoulos, Stefanos and Kolossiatis, Michalis (2016) State dependence and stickiness of sovereign credit ratings:evidence from a panel of countries. Journal of Applied Econometrics, 31 (6). pp. 1065-1082. ISSN 1099-1255

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Abstract

Using data from Moody's, we examine three sources of sovereign credit ratings persistence: true state dependence, spurious state dependence and serial error correlation. Accounting for ratings persistence, we also examine whether ratings were sticky or procyclical for two major crises: the European debt crisis and the East Asian crisis. We set up a dynamic panel ordered probit model with autocorrelated disturbances and nonparametrically distributed random effects. An efficient Markov chain Monte Carlo algorithm is designed for model estimation. We find evidence of stickiness of ratings and of the three sources of ratings persistence, with the true state dependence being weak.

Item Type: Journal Article
Journal or Publication Title: Journal of Applied Econometrics
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/3300/3301
Subjects:
Departments: Faculty of Science and Technology > Mathematics and Statistics
ID Code: 82727
Deposited By: ep_importer_pure
Deposited On: 08 Nov 2016 13:36
Refereed?: Yes
Published?: Published
Last Modified: 15 Jan 2020 03:27
URI: https://eprints.lancs.ac.uk/id/eprint/82727

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