icpp-logo
icpp-logo
Home
ResearchWorking Paper
Ratings, Debt, and Deficits: An Exploration
Macro & Public Finance
29 September, 2026

Ratings, Debt, and Deficits: An Exploration

We look at the effects of debt and primary fiscal balances on sovereign credit ratings through the lens of a simple model. We find that the ratings differ from the implications of the model in three important ways. They give much more weight to debt relative to forecast primary balances. They understate the effects of the difference between the interest rate and the growth rate. They give a very large role to country effects. For the same level of debt and forecast primary balances, they imply extremely different ratings across countries, and imply extremely different levels of debt needed to reach a given rating.

icpp-logo
As the policy wing of Ashoka University, ICPP stands at the intersection of rigour and relevance, building pathways for knowledge to converge, travel, inform, and transform.

Subscribe to our newsletter

©2024-25 Isaac Centre for Public Policy