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EXAMINING THE RELATIONSHIP BETWEEN CREDIT RATINGS AND COUNTRY RISKS IN GREECE: INSIGHTS FROM POLITICAL AND ECONOMIC FACTORS

Year 2023, Volume: 14 Issue: 2, 104 - 119, 16.04.2024

Mehmet Kondoz

Abstract

The role of credit rating agencies in evaluating the creditworthiness and assessing the level of vulnerabilities of nations is essential not only for domestic and foreign investors to calibrate their portfolios but also for economists and policymakers to find better ways to stabilize the nation's risks, such as political and economic vulnerabilities. Based on this explanation, this paper examines the causal relationship between credit rating announcements and economic- and political-based country risks for the case of Greece in the 20 years, covering monthly data from 1999 to 2018. As far as current research is concerned, this is the initial attempt to investigate this nexus from a risk perspective, as the paper considers risk-based data for the empirical analyses. The empirical results demonstrate a unidirectional causal influence of political risk on sovereign credit risk in Greece, but a two-way causal link between sovereign credit risk and economic risk. We end by providing specific suggestions and opinions to both economists and policymakers in Greece, as the empirical results are crucial for policymaking decisions to be implemented, if necessary, to be more effective and sustainable governmental and economic decisions.

Keywords

Economic risk political risk sovereign credit ratings; causality; Greece

References

  • Afonso, A., Furceri, D., & Gomes, P. (2012). “Sovereign Credit Ratings and Financial Markets Linkages: Application To European Data”. Journal of International Money and Finance, 31(3), 606–638.
  • Afonso, A., Gomes, P., & Taamouti, A. (2014). “Sovereign Credit Ratings, Market Volatility, and Financial Gains”. Computational Statistics & Data Analysis, 76, 20–33.
  • Amstad, M., & Packer, F. (2015). “Sovereign Ratings of Advanced and Emerging Economies after the Crisis.” BIS Quarterly Review. December https://www.bis.org/publ/qtrpdf/r_qt1512h.pdf.
  • Türk, Armağan & Eraslan, C. (2016). “Causes and Results of the Greek Debt Crisis: An Analysis with Artificial Neural Networks”. Gaziantep University Journal of Social Sciences, 15(2), 281-302.
  • Athari, S. A., Kondoz, M., & Kirikkaleli, D. (2021). Dependency between Sovereign Credit Ratings and Economic Risk: Insight from Balkan Countries. Journal of Economics and Business, 116, 105984.
  • Bissoondoyal-Bheenick, E. (2005). “An Analysis of the Determinants of Sovereign Ratings”. Global Finance Journal, 15(3), 251-280.
  • Breitung, J., and B. Candelon. 2006. “Testing for Short- and Long-Run Causality: A Frequency-Domain Approach”. Journal of Econometrics, 132: 363–378.
  • Canuto, O., Dos Santos, P. F. P., & de S´a Porto, P. C. (2012). “Macroeconomics and Sovereign Risk Ratings”. Journal of International Commerce, Economics and Policy, 3(02), Article 1250011.
  • Cai, P., Gan, Q., & Kim, S. J. (2018). “Do Sovereign Credit Ratings Matter for Foreign Direct Investments?”, Journal of International Financial Markets, Institutions and Money, 55, 50–64.
  • Chee, S. W., Fah, C. F., & Nassir, A. M. (2015). “Macroeconomics Determinants of Sovereign Credit Ratings”. International Business Research, 8(2), 42.
  • Chen, S. S., Chen, H. Y., Chang, C. C., & Yang, S. L. (2016). “The Relation between Sovereign Credit Rating Revisions and Economic Growth”. Journal of Banking & Finance, 64, 90–100.
  • Christopher, R., Kim, S. J., & Wu, E. (2012). “Do Sovereign Credit Ratings Influence Regional Stock and Bond Market Interdependencies in Emerging Countries?”, Journal of International Financial Markets, Institutions and Money, 22(4), 1070–1089.
  • Dickey, D. A., & Fuller, W. A. (1981). “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”. Econometrica, 49, 1057-1072.
  • Engle, R. F., & Granger, C. W. (1987). “Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica”, Journal of the Econometric Society, 251-276. Featherstone, K. (2011). “The JCMS Annual Lecture: The Greek Sovereign Debt Crisis and EMU: A Failing State in a Skewed Regime”. Journal of Common Market Studies, 49(2), 193-217.
  • Filiz Baştürk, M. (2015). “The Responses of Greece and Ireland to the Crisis”. Yönetim Bilimleri Dergisi. 13(26), 221-239.
  • Granger, C. W. (1969). “Investigating Causal Relations by Econometric Models and Cross-spectral Methods”. Econometrica, 37, 424-438.
  • Jüttner, D. J., & McCarthy, J. (2000). Modelling a Rating Crisis. Unpublished manuscript. Sydney: Macquarie University.
  • Kirikkaleli, D. (2019). “Time–Frequency Dependency of Financial Risk and Economic Risk: Evidence From Greece”. Journal of Economic Structures, 8(1), 37.
  • Kirikkaleli, D., & Ozun, A. (2019). “Co‐Movement of Political Risk and Sovereign Credit Risk: A Wavelet Coherence Analysis for Argentina, Brazil, and Venezuela”. Social Science Quarterly, 100(6), 2094-2114.
  • Kotios, A., Pavlidis, G., & Galanos, G. (2011). “Greece and The Euro: The Chronicle of an Expected Collapse”. Intereconomics, 46 (5), 263.
  • Lutkepohl, H. (1993). Introduction to Multiple Time Series Analysis. Springer, New York.
  • Mellios, C., & Paget-Blanc, E. (2006). “Which Factors Determine Sovereign Credit Ratings?”, The European Journal of Finance, 12 (4), 361–377.
  • Reinhart, C. M. (2002). “Default, Currency Crises, and Sovereign Credit Ratings”. The World Bank Economic Review, 16(2), 151-170.
  • Reisen, H., & Von Maltzan, J. (1999). “Boom and Bust and Sovereign Ratings”. International Finance, 2(2), 273–293. Reisen, H., Von Maltzan, J., & Larraín, G. (1998). Emerging Market Risk and Sovereign Credit Ratings. En: X Seminario Regional de Política Fiscal: compendio de documentos-Santiago: CEPAL, D1–D21, 1998-p.
  • Sensoy, A. (2016).” Impact of Sovereign Rating Changes on Stock Market Co-Movements: The Case of Latin America”. Applied Economics, 48(28), 2600-2610.
  • Sonenshine, R., & Kumari, S. (2022). “The Differential Impact of Political Risk Factors on Emerging Market Bond Spreads and Credit Rating Outlooks”. Journal of Economics and Business, 120, 106066.
  • Te Velde, D. W. (2008). The Global Financial Crisis and Developing Countries. ODI Background Note. London: Overseas Development Institute, 62(24), 156-168.
  • Teixeira, J. C., Silva, F. J., Ferreira, M. B., & Vieira, J. A. (2018). “Sovereign Credit Rating Determinants under Financial Crises”. Global Finance Journal, 36, 1–13.
  • Tsarouhas, D. (2017). “Structure, Agents, and Discourse in Managing Economic Crises: The Case of Greece, 2009-2017”. Uluslararasi İliskiler, 15(58), 2018, pp. 9-19, DOI: 10.33458/uidergisi.518193.
  • United Nations. (2009B). World Economic Situation and Prospects as per mid-2009. New York: available at: http://www.un.org/esa/policy/wess/wesp.html.

YUNANİSTAN ÖRNEĞİNDE KREDİ NOTLARI İLE ÜLKE RİSKLERİ ARASINDAKİ İLİŞKİNİN İNCELENMESİ: POLİTİK VE EKONOMİK FAKTÖRLERDEN ANALİZLER

Year 2023, Volume: 14 Issue: 2, 104 - 119, 16.04.2024

Mehmet Kondoz

Abstract

Kredi derecelendirme kuruluşlarının ulusların kredi değerliliğini ve kırılganlık düzeyini değerlendirmedeki rolü, yalnızca yerli ve yabancı yatırımcıların portföylerini ayarlamaları açısından değil, aynı zamanda ekonomistler ve politika yapıcılar için de siyasi ve ekonomik istikrarsızlıklar gibi ülkenin risklerini istikrara kavuşturmanın daha iyi yollarını bulmaları açısından önemlidir. Bu açıklamadan yola çıkarak bu çalışma, kredi notu duyuruları ile ekonomik ve politik bazlı ülke riskleri arasındaki nedensel ilişkiyi Yunanistan örneğinde 1999'dan 2018'e kadar olan aylık verileri kapsayan 20 yıllık dönemde incelemektedir. Bildiğim kadarıyla, bu ilişkiyi risk perspektifinden yürüten ilk çalışma girişimidir; zira makale ampirik analizler için riske dayalı verileri dikkate almaktadır. Ampirik bulgular, Yunanistan'da ülke kredi notları ile ekonomik risk arasında iki yönlü nedensellik ilişkisi olduğunu, siyasi riskin ise ülke kredi notlarında tek yönlü nedensellik etkisi olduğunu göstermektedir. Ampirik sonuçlar, gerekirse daha etkili ve sürdürülebilir hükümet ve ekonomik kararların uygulanmasına yönelik politika oluşturma kararları açısından hayati önem taşıdığından, Yunanistan'daki hem ekonomistlere hem de politika yapıcılara özel görüşler sunmakla bitiriyoruz.

Keywords

Ekonomik risk; politik risk; ülke kredi dereceleri; nedensellik; Yunanistan

References

  • Afonso, A., Furceri, D., & Gomes, P. (2012). “Sovereign Credit Ratings and Financial Markets Linkages: Application To European Data”. Journal of International Money and Finance, 31(3), 606–638.
  • Afonso, A., Gomes, P., & Taamouti, A. (2014). “Sovereign Credit Ratings, Market Volatility, and Financial Gains”. Computational Statistics & Data Analysis, 76, 20–33.
  • Amstad, M., & Packer, F. (2015). “Sovereign Ratings of Advanced and Emerging Economies after the Crisis.” BIS Quarterly Review. December https://www.bis.org/publ/qtrpdf/r_qt1512h.pdf.
  • Türk, Armağan & Eraslan, C. (2016). “Causes and Results of the Greek Debt Crisis: An Analysis with Artificial Neural Networks”. Gaziantep University Journal of Social Sciences, 15(2), 281-302.
  • Athari, S. A., Kondoz, M., & Kirikkaleli, D. (2021). Dependency between Sovereign Credit Ratings and Economic Risk: Insight from Balkan Countries. Journal of Economics and Business, 116, 105984.
  • Bissoondoyal-Bheenick, E. (2005). “An Analysis of the Determinants of Sovereign Ratings”. Global Finance Journal, 15(3), 251-280.
  • Breitung, J., and B. Candelon. 2006. “Testing for Short- and Long-Run Causality: A Frequency-Domain Approach”. Journal of Econometrics, 132: 363–378.
  • Canuto, O., Dos Santos, P. F. P., & de S´a Porto, P. C. (2012). “Macroeconomics and Sovereign Risk Ratings”. Journal of International Commerce, Economics and Policy, 3(02), Article 1250011.
  • Cai, P., Gan, Q., & Kim, S. J. (2018). “Do Sovereign Credit Ratings Matter for Foreign Direct Investments?”, Journal of International Financial Markets, Institutions and Money, 55, 50–64.
  • Chee, S. W., Fah, C. F., & Nassir, A. M. (2015). “Macroeconomics Determinants of Sovereign Credit Ratings”. International Business Research, 8(2), 42.
  • Chen, S. S., Chen, H. Y., Chang, C. C., & Yang, S. L. (2016). “The Relation between Sovereign Credit Rating Revisions and Economic Growth”. Journal of Banking & Finance, 64, 90–100.
  • Christopher, R., Kim, S. J., & Wu, E. (2012). “Do Sovereign Credit Ratings Influence Regional Stock and Bond Market Interdependencies in Emerging Countries?”, Journal of International Financial Markets, Institutions and Money, 22(4), 1070–1089.
  • Dickey, D. A., & Fuller, W. A. (1981). “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”. Econometrica, 49, 1057-1072.
  • Engle, R. F., & Granger, C. W. (1987). “Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica”, Journal of the Econometric Society, 251-276. Featherstone, K. (2011). “The JCMS Annual Lecture: The Greek Sovereign Debt Crisis and EMU: A Failing State in a Skewed Regime”. Journal of Common Market Studies, 49(2), 193-217.
  • Filiz Baştürk, M. (2015). “The Responses of Greece and Ireland to the Crisis”. Yönetim Bilimleri Dergisi. 13(26), 221-239.
  • Granger, C. W. (1969). “Investigating Causal Relations by Econometric Models and Cross-spectral Methods”. Econometrica, 37, 424-438.
  • Jüttner, D. J., & McCarthy, J. (2000). Modelling a Rating Crisis. Unpublished manuscript. Sydney: Macquarie University.
  • Kirikkaleli, D. (2019). “Time–Frequency Dependency of Financial Risk and Economic Risk: Evidence From Greece”. Journal of Economic Structures, 8(1), 37.
  • Kirikkaleli, D., & Ozun, A. (2019). “Co‐Movement of Political Risk and Sovereign Credit Risk: A Wavelet Coherence Analysis for Argentina, Brazil, and Venezuela”. Social Science Quarterly, 100(6), 2094-2114.
  • Kotios, A., Pavlidis, G., & Galanos, G. (2011). “Greece and The Euro: The Chronicle of an Expected Collapse”. Intereconomics, 46 (5), 263.
  • Lutkepohl, H. (1993). Introduction to Multiple Time Series Analysis. Springer, New York.
  • Mellios, C., & Paget-Blanc, E. (2006). “Which Factors Determine Sovereign Credit Ratings?”, The European Journal of Finance, 12 (4), 361–377.
  • Reinhart, C. M. (2002). “Default, Currency Crises, and Sovereign Credit Ratings”. The World Bank Economic Review, 16(2), 151-170.
  • Reisen, H., & Von Maltzan, J. (1999). “Boom and Bust and Sovereign Ratings”. International Finance, 2(2), 273–293. Reisen, H., Von Maltzan, J., & Larraín, G. (1998). Emerging Market Risk and Sovereign Credit Ratings. En: X Seminario Regional de Política Fiscal: compendio de documentos-Santiago: CEPAL, D1–D21, 1998-p.
  • Sensoy, A. (2016).” Impact of Sovereign Rating Changes on Stock Market Co-Movements: The Case of Latin America”. Applied Economics, 48(28), 2600-2610.
  • Sonenshine, R., & Kumari, S. (2022). “The Differential Impact of Political Risk Factors on Emerging Market Bond Spreads and Credit Rating Outlooks”. Journal of Economics and Business, 120, 106066.
  • Te Velde, D. W. (2008). The Global Financial Crisis and Developing Countries. ODI Background Note. London: Overseas Development Institute, 62(24), 156-168.
  • Teixeira, J. C., Silva, F. J., Ferreira, M. B., & Vieira, J. A. (2018). “Sovereign Credit Rating Determinants under Financial Crises”. Global Finance Journal, 36, 1–13.
  • Tsarouhas, D. (2017). “Structure, Agents, and Discourse in Managing Economic Crises: The Case of Greece, 2009-2017”. Uluslararasi İliskiler, 15(58), 2018, pp. 9-19, DOI: 10.33458/uidergisi.518193.
  • United Nations. (2009B). World Economic Situation and Prospects as per mid-2009. New York: available at: http://www.un.org/esa/policy/wess/wesp.html.
There are 30 citations in total.

Details

Primary Language English
Subjects Comparative Economic Systems
Journal Section Research
Authors

Mehmet Kondoz

Publication Date April 16, 2024
Submission Date March 8, 2024
Acceptance Date March 22, 2024
Published in Issue Year 2023 Volume: 14 Issue: 2

Cite

APA Kondoz, M. (2024). EXAMINING THE RELATIONSHIP BETWEEN CREDIT RATINGS AND COUNTRY RISKS IN GREECE: INSIGHTS FROM POLITICAL AND ECONOMIC FACTORS. LAÜ Sosyal Bilimler Dergisi, 14(2), 104-119.

Lefke Avrupa Üniversitesi (LAÜ) Sosyal Bilimler Dergisi haziran ve aralık aylarında olmak üzere yılda iki defa yayınlanan iki hakemli bir dergidir. Derginin yelpazesi toplum bilimlerinin tüm disiplinlerini ve dallarını kapsamaktadır. LAÜ Sosyal Bilimler Dergisi yalnızca Türkçe ve İngilizce makaleleri kabul etmektedir.  http://euljss.eul.edu.tr/euljss/