Sovereign credit ratings in the European Union: a model-based fiscal analysis

Vito Polito, Michael Wickens

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We present a model-based measure of sovereign credit ratings derived solely from the fiscal position of a country: a forecast of its future debt liabilities, and its potential to use fiscal policy to repay these. We use this measure to calculate credit ratings for 14 European countries over the period 1995–2012. This measure identifies a European sovereign debt crisis almost two years before the official ratings of the credit rating agencies.
Original languageEnglish
Pages (from-to)220-247
Number of pages28
JournalEuropean Economic Review
Early online date26 Jun 2015
Publication statusPublished - 1 Aug 2015


  • credit risk
  • sovereign risk
  • fiscal limits
  • default probability

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