Are the credit rating agencies biased against Mena countries ?

Abstract EN

We investigate the claims on regional biases in the sovereign credit ratings assigned by Fitch Ratings, Moody’s and Standard & Poor’s credit rating agencies (CRAs) for a group of 99 countries by using a series of econometric models that consider a wide range of macroeconomic, financial, institutional, regional and geopolitical indicators.

Our empirical results based on the seemingly unrelated regressions (SUR) estimates indicate a strong home country bias towards the United States while there seems to be no special biases against individual group of countries such as the Middle East and North Africa (MENA) countries.

We also demonstrate how modeling errors in the form of omitted variables can easily cause misleading results portraying the CRAs as biased towards or against different country groups.