Healthy domestic variables can smooth rating downgrades, paper finds

Bank of Spain

Having healthy domestic fundamentals can "influence" rating agencies when they consider whether or not to downgrade a country's sovereign rating, according to a Bank of Spain working paper published today, but less so when it comes to upgrades.

In Sovereign ratings and their asymmetric response to fundamentals, Carmen Broto and Luis Molina estimate a panel data model for 67 countries, both developed and emerging economies, based on Standard & Poor's ratings, finding that "changes in sovereign

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