The Determinants of Sovereign Credit Ratings: Indonesia and Its Neighborhood Countries 1998-2016

Abstract

The aim of this research is to study the determinants of sovereign credit ratings of Indonesia andits neighborhood countries in the period of 1998-2016. Using secondary data and analyzed usingordered probit, it is found that every credit rating agency has its own variables influencing to itspublished credit ratings.In general, for Indonesia and its neighborhood countries, the variables withsignificant and positive relationship are fiscal balance and current account deficit to GDP, freedomindex, and GDP per capita; while the variables with significant and negative relationship are externaldebt to GNI and real exchange rate. Gross domestic savings to GDP influences credit ratings inboth ways. Interestingly, inflation does not affect the credit ratings. Indonesia and neighborhoodgovernments could use this information to manage their macroeconomic indicators in order to getfavorable ratings from credit rating agencies.

Micro and Macroeconomic Determinants of Indonesian Government’s Bonds Liquidities in the Secondary Market (2012-2016)

“…The result show that adjusted R 2 is below 50 percent which shows that there exist other variables which may affect liquidly of government bonds. Alternative variables which can be incorporated in the model include foreign participation in bond market (Ebeke & Lu, 2015), the use of IT system such as Electronic Trading Platform (ETP), number of dealers and brokers, impact of government bond buyback, number of government debt (Gao, Jin, & Thompson, 2018), sovereign credit rating (Michel & Solikin, 2019), and debt switch. Psychological impacts in terms of behaviors of investors and impacts of rumors or news or announcements to bond market in Indonesia are also some topics or variables for future research.…”