Sovereign Credit Rating and Macroeconomic Variables: An Empirical Analysis on Dynamic Linkages in Malaysia

• Main Authors: Abd. Halim@Hamilton Ahmad, Siti Nurazira Mohd Daud, Ainulashikin Marzuki
• Format: Conference Paper
• Language: English
• Published: 2009
• Online Access: http://dspace.unimap.edu.my/xmlui/handle/123456789/1405; http://hdl.handle.net/123456789/1405

This paper aims to investigate the long- and short-run relationship of sovereign credit ratings in Malaysia. This study employed quarterly data from 1991 to 2004. A robust and recent time series techniques known as the Unrestricted Error Correction Model – Bound Test was used which is applicable irrespective of whether the regressors are I(0) and I(1). The results show that in the long- run, Debt to GDP, Debt Service to Reserves and US Treasury Bill rate (3-months) appear to have significant impact to Malaysia sovereign credit ratings. The findings of the study show that Malaysia’s long-term ability to pay its debt contains information for prediction of the credit rating.