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Sovereign credit ratings and macroeconomic variables: An application of bounds testing approach to Malaysia


Masih, Mansur and Ahmad, Abd Halim @ Hamilton and Mohd Daud, Siti Nurazira and Marzuki, Ainulashikin (2008) Sovereign credit ratings and macroeconomic variables: An application of bounds testing approach to Malaysia. Journal of Academy of Business and Economics, 8 (1). pp. 109-119. ISSN 1542-8710

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Abstract

This paper aims to investigate the short- and long-run macroeconomic determinants of sovereign credit ratings in developing countries.Malaysia is used as a case study.This study employed quarterly data from 1991 to 2004.We apply a recently developed time series technique called ‘Auto-Regressive Distributed Lag’ (ARDL) [Pesaran, Shin, and Smith,Journal of Applied Econometrics, 2001] which has taken care of a major limitation of the conventional cointegrating tests in that they suffer from the pre-test biases.Based on the above rigorous methodology, our evidence tends to suggest that both in the short-and long- run, Debt ratios such as (Debt to GDP, Debt Service to Reserve) and US Treasury Bill rate (3-months) appear to have had a significant impact on Malaysia’s sovereign credit ratings.The findings of the study tend to indicate that Malaysia’s short- and long-term ability to pay its debt contain information for the prediction of her credit ratings.These findings are plausible and have strong policy implications for developing countries like Malaysia.

Item Type: Article
Uncontrolled Keywords: Malaysia, sovereign credit rating, macroe conomic variables, ARDL cointegration.
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Economics, Finance & Banking
Depositing User: Mr. Abd. Halim @ Hamilton Ahmad
Date Deposited: 11 Nov 2014 07:11
Last Modified: 26 Apr 2016 04:05
URI: http://repo.uum.edu.my/id/eprint/12578

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