The current research on sovereign credit ratings has been expanded in the last decade, especially in the
years following the Global Financial Crisis and the subsequent European Debt Crisis. While the role of
debt-to-GDP ratio was always taken into account, there is no previous empirical work to the best of my
knowledge that hypothesized that should a certain threshold is surpassed, then its impact on sovereign
credit ratings is more severe. Using data from Moody’s and Fitch, this thesis employs a Panel Threshold
Fixed-Effects methodology to assess the varying effect of debt-to-GDP ratio to the attributed sovereign
Credit Ratings for member states of the Eurozone. Based on empirical evidence, the two rating agencies
share a similar approach toward public debt but they have different levels of tolerance. Two different
thresholds are identified; those are 95.782 and 120.038 for Fitch and Moody’s, respectively, resulting
in two distinct regimes of ’low’ and ’high’ implications for the attributed sovereign credit rating. The
regime-dependant coefficients in the ’low regime’ for Fitch are not statistically significant, implying that
public debt does not have harmful consequences at low levels. Overall, the debt-to-GDP ratio erodes more
drastically the solvent ability of a sovereign when the estimated threshold is exceeded.
(EL)
Διπλωματική εργασία--Πανεπιστήμιο Μακεδονίας, Θεσσαλονίκη, 2023.
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Previous issue date: 2023
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Πανεπιστήμιο Μακεδονίας
