Trends in Sovereign Debt Ratings: Are There any Preliminary Signs of Bias?

Abstract

This chapter highlights trends in rating levels and actions that raise questions about potential bias. The chapter uses descriptive techniques and trends to analyze foreign currency sovereign debt ratings for 132 countries over the period from 1997 to 2011. The analysis highlights interesting distinctions between the rating actions taken for rich countries (defined as high income) and poor countries (defined as lower-middle and low income), and between regional groupings of poor countries. While interesting, the trends identified in this chapter are not used to make conclusive statements about bias, as the descriptive and trend analysis does not allow for such conclusions. It, however, highlights the need for the more rigorous methodology and econometric evidence that are presented in subsequent chapters.