The effects of the crisis on credit rating agencies: a panel data analysis

Abstract

This effort aims to observe the determinants that affect the decisions of CRAs. The dataset concerns 12 Eurozone countries for the period from 2005 to 2021 and contains nine variables from the macroeconomic sector, also it is characterized by cross-sectional-dependence. Highlight that it is important to follow three different paths. Firstly, our dataset contains cross sectional dependence, for this reason we have to adapt the regressions by means of the cross sectional average. Second, we cannot ignore the impact of the crisis of 2007-2009, for this reason we utilize dummies for some variables of the external sector which received a huge importance on the years of crisis. Lastly, we will analyze the cumulated current account and its significance. We applied the analysis for panel data via pooled OLS, fixed & random effects for every agency. To sum up, only government debt is significant for every regression and the current account seems to be significant in the case that we use the average of the CRAs as dependent variable and for the most of the CRAs regressions. On the other side, the external balance is not significant for any level of significance. Government debt affect stronger the CRAs after the crisis in comparison with some years earlier.