How Do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis

Sager, Fritz; Hinterleitner, Markus (2016). How Do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis. Politics & Policy, 44(4), pp. 783-815. Wiley 10.1111/polp.12165

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Text CRAs_Austerity_Programs_Sager_Hinterleitner.pdf - Submitted Version Available under License Publisher holds Copyright. This is the pre-peer reviewed version of the following article: How Do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis which has been published in final form at 10.1111/polp.12165. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. Download (254kB) | Preview

During the recent European debt crisis, credit rating agencies
(CRAs) and the ratings they were producing became a frequent bone
of contention. We analyze which factors are considered by CRAs
when they judge a state's credibility in implementing an announced
austerity program. The results of a fuzzy-set Qualitative Comparative
Analysis of credit ratings show that implementation-related factors
had a comparatively minor impact while the level of economic competitiveness
of the evaluated country displayed high explanatory
power. The findings highlight the desolate implications for less competitive
countries that emanate from credit ratings and their influence
on refinancing costs. While competitive states are deemed better able
to generate future growth and therefore get positive evaluations, less
competitive states cannot prevent (further) downgrades in the short or
middle-term by announcing austerity programs.

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