Common Characteristics of Rated Sovereigns Prior to Default

Abstract

External imbalances and political issues are often the sovereign rating factors that best signal future default. External imbalances are associated with public or private sector excesses, and they generally have fiscal and monetary repercussions. In Standard & Poor’s Ratings Services’ view, no single measure consistently serves as a good leading indicator of sovereign default. Instead, a confluence of factors, including economic policy shortcomings, underlies most sovereign defaults.