Sovereign Credit Ratings in „New“ EU Member States – A Comparative Analysis in Times of Crisis and Tranquility1

Abstract

This paper investigates the impact of quantitative and qualitative factors on the long-term sovereign credit ratings of nine countries that joined the European Union in 2004 (Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia). Among this group, two subgroups are distinguished – euro area members and countries that pursue an independent monetary policy. The analysis is conducted for the period of 2004q1 – 2018q4, which is later divid-ed into pre-crisis, crisis, and post-crisis sub-periods. Using a panel fixed effects model with robust standard errors, we find that the macroeconomic variables played the dominant role throughout the period under analysis, and particularly during the crisis. Moreover, the quality of governance had an important impact on the ratings in all three sub-periods. We also find that euro area membership has provided additional benefits in terms of countries’ perceived credibility.