KOTĚŠOVCOVÁ, Jana, Jiří MIHOLA and Petr BUDINSKÝ. The relationship between sovereign credit rating and trends of macroeconomic indicators. Investment Management and Financial Innovations. Sumy (Ukraine): LLC “Consulting Publishing Company “Business Perspectives”, vol. 16, No 3, p. 292 - 306. ISSN 1810-4967. doi:10.21511/imfi.16(3).2019.26. 2019.
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Basic information
Original name The relationship between sovereign credit rating and trends of macroeconomic indicators
Name in Czech Vztah mezi suverénním ratingem a trendy makroekonomických ukazatelů
Authors KOTĚŠOVCOVÁ, Jana (203 Czech Republic, guarantor, belonging to the institution), Jiří MIHOLA (203 Czech Republic, belonging to the institution) and Petr BUDINSKÝ (203 Czech Republic, belonging to the institution).
Edition Investment Management and Financial Innovations, Sumy (Ukraine), LLC “Consulting Publishing Company “Business Perspectives” 2019, 1810-4967.
Other information
Original language English
Type of outcome Article in a journal
Field of Study 50200 5.2 Economics and Business
Country of publisher Ukraine
Confidentiality degree is not subject to a state or trade secret
WWW Celý text článku
RIV identification code RIV/04274644:_____/19:#0000509
Organization unit University of Finance and Administration
Doi http://dx.doi.org/10.21511/imfi.16(3).2019.26
Keywords (in Czech) ratingová známka; metodologie tvorby ratingu; makroekonomické ukazatele; rating státu
Keywords in English rating level; credit rating; rating methodology; macroeconomic indicators; sovereign rating
Tags AR 2019-2020, RIV_2020, SCOPUS, unor_2020_o, xJ3
Tags International impact, Reviewed
Changed by Changed by: Bc. Jan Peterec, učo 24999. Changed: 27/4/2020 08:27.
Abstract
The sovereign credit rating provides information about the creditworthiness of a given country and thereby serves investors as a tool for deciding which financial assets merit the investment of their funds. Given that the determination of a sovereign credit rating is a highly complex and challenging activity. Specialized agencies are involved in determining the rating. And yet it remains worthwhile to analyze their work and seek out easily accessible tools for generating estimates of such ratings. The objective of this article is to explore whether sovereign credit rating can be reliably estimated using trends of selected macroeconomic indicators, despite the fact that sovereign credit rating is most likely influenced by factors other than economic factors. This can be used for strategic considerations at national and multinational level. The relationships between sovereign credit rating and the trends of macroeconomic indicators were examined using statistical methods, linear multiple regression analysis, cumulative correlation coefficient, and non-traditional multicollinearity. The data source used is comprised of selected World Bank indicators meeting the conditions of completeness and representativeness. The data set showed a cumulative correlation coefficient value greater than 95%, however at a 100% multicollinearity. This is followed by the gradual elimination of indicators, but even this did not achieve acceptable values. From this, it can be concluded that rating levels are not explainable solely by the trends of economic indicators, but that other influences, e.g. political, were applied in their creation. Nonetheless, the fact that the statistical model yielded acceptable results for 5 and fewer indicators allowed a regression equation to be found that gives good estimates of a country’s rating. This allows, for example, relatively easy forecasting of ratings by forecasting the development of selected macroeconomic indicators.
Abstract (in Czech)
Cílem článku bylo prozkoumat, zda lze spolehlivě odhadovat sovereign rating pomocí vývoje vybraných makroekonomických ukazatelů přesto, že na sovereign rating pravděpodobně působí i jiné vlivy než ekonomické. Vztahy mezi sovereign ratingem a vývojem makroekonomických ukazatelů byl zkoumán pomocí statistických metod, lineární vícenásobné regresní analýzy, souhrnného korelačního koeficientu a multikolinearity. Jako datový zdroj sloužily vybrané ukazatele Světové banky, které splňovaly podmínky úplnosti a reprezentativnosti. Soubor dat vykazoval hodnotu souhrnného korelačního koeficientu vyšší než 95 % avšak při multikolinearitě 100 %. Následovalo postupné vylučování ukazatelů, ale ani tímto nebylo dosaženo přijatelných hodnot. Z toho vyplývá, že ratingové stupně nejsou vysvětlitelné výhradně vývojem ekonomických ukazatelů, ale že při jejich tvorbě byly uplatněny i jiné vlivy, např. politické. Avšak skutečnost, že statistický model dával přijatelné výsledky pro 5 a méně ukazatelů umožnil nalezení regresní rovnice, která dává dobré odhady ratingu státu.
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