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The politics of creditworthiness: political and policy commentary in sovereign credit rating reports

Published online by Cambridge University Press:  06 February 2020

Zsófia Barta Open the ORCID record for Zsófia Barta [Opens in a new window]  and
Kristin Makszin
Zsófia Barta
Affiliation:
Department of Political Science, University of Albany, USA E-mail: [email protected]
Kristin Makszin
Affiliation:
Leiden University College The Hague, Netherlands E-mail: [email protected]
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Abstract

How much do politics and politically sensitive policy choices matter for sovereign credit ratings? We contend that while policy is consistently important for rating decisions, attention to politics varies with perceived uncertainty. Quantitatively analysing the text of 635 sovereign rating reports issued by Standard and Poor’s (S&P) between 1999 and 2012 for 40 European countries, we find that S&P scrutinises policy with similar intensity across countries, but political scrutiny was less intense in developed countries and prospective European Union members (categories formerly associated with lower uncertainty) than in emerging countries until the crisis dispelled illusions of lower uncertainty in these categories. Our findings nuance the common notion that financial market actors allow countries perceived to belong to low-risk categories more “room-to-move” in their political and policy choices, by showing that in rating decisions such permissiveness only applied to politics – but not to policy – and it ended with the global financial crisis.

Keywords

content analysis“golden straightjacket”political and policy constraintssovereign credit ratingssovereign rating reportsuncertainty and risk
Type
Research Article
Information
Journal of Public Policy , Volume 41 , Issue 2 , June 2021 , pp. 307 - 330
Copyright
© The Author(s), 2020. Published by Cambridge University Press

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