ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Gautham UdupaSubscribe to Gautham Udupa

Understanding Sovereign Ratings and Their Implications for Emerging Economies

The rating methodologies of the big three credit rating agencies—S&P, Moody’s, and Fitch—are scrutinised and evaluated. The factors driving sovereign ratings are examined using a regression framework and machine learning techniques with a panel of 162 countries covering ratings from 2000 to 2018. Across all models, institutional quality is the most significant factor driving sovereign ratings, suggesting that building more vital institutions can lower a sovereign’s borrowing costs by improving sovereign ratings. Additionally, only sustainable GDP growth propelled by strong structural reforms and productive investment increase CRA ratings. The findings suggest that the over-reliance of market participants on CRA ratings to assess sovereign creditworthiness may be unwarranted, particularly during crisis periods.

Fiscal Situation of India in the Time of Covid-19

India announced a fiscal package worth `1.7 trillion to fight the COVID-19 pandemic, but there were arguments for more spending. Using data from a cross-section of countries, this paper estimates the relationship between fiscal spending and the spread of COVID-19, economic stringency, and macroeconomic factors. It argues that subsidy rationalisation is the way to fund the increased expenditure on health and direct transfers while maintaining fiscal discipline.

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