Sovereign Debt Discounts and the Unwillingness to Pay

Clark, Ephraim; Zenaidi, Amel

doi:10.1142/9789813224940_0012

Cited by 9 publications

(4 citation statements)

References 2 publications

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“…The relevant data for most of the macroeconomic series in this paper as well as for several other countries can be found at: https://countrymetrics.wordpress.com/blog/. 12 See, for example, Clark and Zenaidi (1999).…”

Section: The Country Financial Risk Premiummentioning

confidence: 99%

Macroeconomic effects on emerging-markets sovereign credit spreads

Clark

Kassimatis

2015

Journal of Financial Stability

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a b s t r a c tThis paper investigates the explanatory and forecasting power of macroeconomic fundamentals on emerging market sovereign credit spreads. We pay special attention to a new set of macroeconomic factors related to market values that reflect investor expectations concerning future economic performance. The model we propose captures a significant part of the empirical variation in spreads. Importantly, it also includes a powerful forecasting component that extends up to 12 months outside the sample period. The forward-looking variables that we construct are significant and complement and enhance the explanatory content of the conventional variables found in the extant literature.

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Section: The Country Financial Risk Premiummentioning

confidence: 99%

Macroeconomic effects on emerging-markets sovereign credit spreads

Clark

Kassimatis

2015

Journal of Financial Stability

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“…Credit risk is defined as the potential losses due to the borrower's failure to meet the contractual obligation to pay his debt (Fahmi et al, 2008). While Clark (1997) and Clark & Zenaidi (1999) saw that sovereign borrower's creditworthiness depends not only on its ability but also on its willingness to pay its debt. Bheenick (2005) stated that, according to the founder of Moody's, John Moody, a credit rating indicates the creditworthiness of a government by assessing two main aspects: "capability to pay and willingness to pay".…”

Section: Introductionmentioning

confidence: 99%

Estimating Sovereign Credit Rating: Is Kuwait Overrated?

AlAli¹

2022

IREF

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Despite all the criticism surrounding the reliability of credit rating agencies’ rating systems, these agencies' ratings still play an essential role in determining the cost of funding for government bonds. These agencies are also accused of not applying the same standards for all countries resulting in mis-rating causing a disturbance in these countries economic and financial systems. Countries try their best to obtain the highest rating possible to reduce their cost of borrowing and increase the demand for their bonds in the global financial market. This research is set to examine whether or not Kuwait is getting a favorable sovereign credit rating from the three largest credit rating agencies. Using a panel data regression for 40 countries for the year 2017, results revealed that Kuwait enjoyed a favorable treatment from the three major credit rating agencies where it was rated by an average of 3.18 notches higher than what it should be. The results also indicates that Kuwait did not take advantage of its inflated credit rating and the policy makers did not address the factors that would improve their credit rating and as a result Kuwait sovereign credit rating was downgraded by all three credit rating agencies in 2022.

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“…Governments can choose either to honour debt agreements or to default. Thus, sovereign risk reflects not just capacity to pay, but also willingness to pay (Eaton, Gersovitz and Stiglitz, 1986;Clark and Zenaidi, 1999;S&P RatingsDirect 2013). Giving attention to willingness to pay in sovereign ratings directly articulates with traditional credit assessment, where the first of the 5Cs of credit analysis is character.…”

Section: Introductionmentioning

confidence: 99%

Sovereign ratings and national culture

Dang

Partington

2020

Pacific-Basin Finance Journal

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Default by sovereign governments depends upon their willingness to default and the nation's capacity to pay. These are major factors considered by rating analysts and both may be affected by national culture. We hypothesise that ratings are related to culture and empirically examine the relation between culture and both levels and changes in sovereign ratings. Sovereign ratings have traditionally been modelled in terms of macroeconomic variables, rating outlook and rating history. Culture variables are significant when included in such models and their addition results in better models as judged by the QIC statistic and likelihood ratio tests. The significance of culture variables is robust to replication and to estimation using instrumental variables.

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Sovereign Debt Discounts and the Unwillingness to Pay

Cited by 9 publications

References 2 publications

Macroeconomic effects on emerging-markets sovereign credit spreads

Macroeconomic effects on emerging-markets sovereign credit spreads

Estimating Sovereign Credit Rating: Is Kuwait Overrated?

Sovereign ratings and national culture

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