The impact of sovereign ratings on research & development in developing countries

Thumbnail Image

Date

2020

Authors

Tsunyane, Makhala

Journal Title

Journal ISSN

Volume Title

Publisher

Abstract

Sovereign credit ratings are considered imperative in assessing the value and worth of a nation's economy, modern theory stresses the accumulation of knowledge as one of the critical factors for economic growth and productivity. One aspect of accumulating knowledge is through Research and Development (R&D). The aim of this paper is to analyse if credit ratings are robust determinants of R&D and various economic variables that have been suggested in the literature as influencing R&D, such as the number of researchers, tertiary school enrolment, financial development, the rule of law, and foreign direct investment as robust determinants of R&D performed in developing countries. Through the use of an Extreme Bounds Analysis (EBA), the study covers 30 middle-income countries from 2002 to 2017. The study’s estimations provide evidence that credit ratings, the number of researchers, tertiary school enrolment, financial development, the rule of law, and foreign direct investment, are robust determinants of R&D. However, the results demonstrated trade openness to be fragile in determining R&D. When it comes to ratings, the study reveals that a change in the credit rating is asymmetric, because a downgrade was robust and had a significant impact on R&D, while an upgrade found to be fragile and insignificant.

Description

A research submitted in fulfilment of the requirements for the degree of Masters of Management in Finance and Investment (MMFI) to the Faculty of Commerce, Law and Management, Wits Business School, University of the Witwatersrand, Johannesburg, 2020

Keywords

Sovereign credit ratings, Modern theory, Economic growth, Research and Development (R&D), DEVELOPING COUNTRIES

Citation

Endorsement

Review

Supplemented By

Referenced By