economics_working_paper_2022_05_en.pdf

"Public debt levels are a very weak predictor of a country’s credit rating if a country’s other features are not taken into account. However, everything else equal, more public debt is associated with worse ratings. This paper explores the relationship between debt and sovereign creditworthi...

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Έκδοση: 2022
id oapen-20.500.12657-57832
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spelling oapen-20.500.12657-578322023-02-01T09:33:35Z EIB Working Paper 2022/05 - How much is too much? European Investment Bank Business & Economics Banks & Banking bic Book Industry Communication::K Economics, finance, business & management::KF Finance & accounting::KFF Finance::KFFK Banking "Public debt levels are a very weak predictor of a country’s credit rating if a country’s other features are not taken into account. However, everything else equal, more public debt is associated with worse ratings. This paper explores the relationship between debt and sovereign creditworthiness through the debt thresholds associated with rating changes. It finds that the impact of an increase in public debt is non-linear and crucially depends on a country’s economic situation. Low levels of gross domestic product per capita are associated with a smaller range of possible ratings than higher levels. In countries with a higher gross domestic product per capita, a change in debt levels is thus more likely to result in a rating change. Overall, the non-linear relationship between debt and creditworthiness is substantial, and accounting for it improves the performance of sovereign credit rating models significantly." 2022-08-08T05:32:06Z 2022-08-08T05:32:06Z 2022 book 9789286152368 https://library.oapen.org/handle/20.500.12657/57832 eng application/pdf n/a economics_working_paper_2022_05_en.pdf 10.2867/961968 10.2867/961968 European Investment Bank 9789286152368 Knowledge Unlatched (KU) open access
institution OAPEN
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language English
description "Public debt levels are a very weak predictor of a country’s credit rating if a country’s other features are not taken into account. However, everything else equal, more public debt is associated with worse ratings. This paper explores the relationship between debt and sovereign creditworthiness through the debt thresholds associated with rating changes. It finds that the impact of an increase in public debt is non-linear and crucially depends on a country’s economic situation. Low levels of gross domestic product per capita are associated with a smaller range of possible ratings than higher levels. In countries with a higher gross domestic product per capita, a change in debt levels is thus more likely to result in a rating change. Overall, the non-linear relationship between debt and creditworthiness is substantial, and accounting for it improves the performance of sovereign credit rating models significantly."
title economics_working_paper_2022_05_en.pdf
spellingShingle economics_working_paper_2022_05_en.pdf
title_short economics_working_paper_2022_05_en.pdf
title_full economics_working_paper_2022_05_en.pdf
title_fullStr economics_working_paper_2022_05_en.pdf
title_full_unstemmed economics_working_paper_2022_05_en.pdf
title_sort economics_working_paper_2022_05_en.pdf
publishDate 2022
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