Discussion paper

DP9150 Modelling the U.S. sovereign credit rating

A methodology for generating sovereign credit ratings based on macroeconomic theory is proposed. This is applied to quarterly U.S. data from 1970 to 2011. Over this period the official credit rating of U.S. Treasury securities has been of the highest quality. In contrast, the model-based measure finds that there are two clear instances in which the U.S. sovereign credit rating, if evaluated on the basis of economic fundamentals, should have been have been downgraded: the first oil crisis of the 1970s and in the aftermath of the Lehman collapse in 2008. This result is robust to several alternative views on the maximum borrowing capacity of the U.S. economy.


Wickens, M and V Polito (2012), ‘DP9150 Modelling the U.S. sovereign credit rating‘, CEPR Discussion Paper No. 9150. CEPR Press, Paris & London. https://cepr.org/publications/dp9150