A comparison of the financial institutions' view and the market's view of country creditworthiness

In 1979, both Institutional Investor and Euromoney began publishing country risk ratings. For years, international commercial bankers have used these rating services as part of their international evaluation process for lending to sovereign governments. An examination of these services suggests that Institutional Investor's ratings, which are based upon questionnaire responses from commercial bankers, reflect the financial institutions' perception of country creditworthiness. On the other hand, Euromoney's ratings represent a market view in that they are based upon data observed from financial and credit markets. The purpose of this article is to investigate the consistency between the financial institutions' view and the market's view in assessing the creditworthiness of developing and newly industrialized countries.