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This is the best historical time series which I could find from tradingeconomics.com/malaysia/rating. It would be great if someone could answer my question. I am currently researching on the topic of credit rating. I need to use the data from the link above. However, I am not sure if I interpreted the ratings correctly. For e.g. Fitch's ratings for Malaysia in 2008 and in 2013 are A-, can I assume that from 2008 to 2013 Malaysia had A- as ratings (does it apply to other Credit Rating Agencies as well)? I am not sure if countries get rated yearly and if I could use the last rating of the year to represent the rating for a particular year? Your help is greatly appreciated!

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These ratings are called sovereign credit ratings. The ratings describe the creditworthiness of a country at the time the rating is published. The rating companies such as Fitch or Standard & Poors calculate and publish the ratings either by request (e.g., from the Chinese government) or autonomously so that they can sell the ratings to their subscribers.

The ratings do not reflect the entire past or the future creditworthiness of countries; instead they reflect their present creditworthiness. For example, in August 2011, Standard & Poors downgraded the US's rating from AAA to AA+, as a result of the congress' approval of raising the US debt ceiling. The AA+ rating reflected the creditworthiness of the US government at that time, not 6 months ago and not 6 months later.

So, to answer your question, if from 2008 to 2013 Malaysia had A- as ratings, you may assume that it had the same rating for the whole time but that's just an assumption you can make if you are sure the country has not been rated differently during that time. Even in that case, the fact that the country has not been re-rated during that time period does not mean the country has had the same creditworthiness the whole time. It may be the case that the rating companies did not re-rate it for some reasons.

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  • $\begingroup$ Thank you very much for your answer, now I have a clearer idea of this topic. However, would it still make sense if I make the assumption as I did before, so that I could perform a correlation analysis? I have looked through some documents from the Big 3 and the credit ratings are similar. $\endgroup$ – user25215 Nov 12 '16 at 13:43
  • $\begingroup$ You can do correlational analyses. however, beware that you can not safely consider the rating as a continuous variable. They are ordinal variables. So, you need to look into the correlational analysis appropriate between an ordinal variable and the type of the other variable you are interested in. If your other variable is continuous, then Spearman's Rank-Order Correlation may be what you need. You can also look into ANOVA. If ANOVA tells you that your continuous variable indeed differs across different rating levels, that could substantiate your correlational analysis. $\endgroup$ – st19297 Nov 12 '16 at 19:09
  • $\begingroup$ Thank you very much for your help! Now it is much clearer! $\endgroup$ – user25215 Nov 18 '16 at 14:05
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Another option is to look at the sovereign credit spreads over time for the country - this gives a fine grained and more market based view of its credit quality over time.

Deutsche Bank Research for example shows the default probabilities over time for various countries (backed out from the credit spreads).

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