Comparative Rating Index for Sovereigns (CRIS): An update following recent rating events using both Moody’s and S&P’s ratings.
[From the Economic Division, Ministry of Finance: This is the latest update on the comparative credit ratings scores of nations, using Moody’s as well as Standard and Poor’s ratings data following recent ratings events, and using a formula developed by our researchers. The detailed work (not for dissemination) occurs in a paper by Kaushik Basu, Anil Bisen, Supriyo De, Rangeet Ghosh and Shweta.]

Introduction The Comparative Ratings Index for Sovereigns (CRIS) was developed as a relative performance index based on sovereign credit ratings. The rationale was that while credit rating agencies give out the sovereign credit rating of each nation as an absolute grade, investors are more concerned with comparative rating, that is, how each nation performs visà-vis other nations. Conceptually, if a highly rated economy falls down the ratings ladder, other economies would improve their ‘relative’ desirability as investment destinations, even if their ratings remain unchanged. The effects would be larger in the case of downgrades of bigger economies. The CRIS formula was applied to Moody’s sovereign ratings and referred to as ‘Moody CRIS.’1 Subsequently, this was applied to Standard and Poor’s (S&P’s) ratings and a new set of comparative scores referred to as CRIS-SP was produced.2 Following recent rating events, including Moody’s downgrades of major European economies (Luxembourg, Germany and Netherlands) a fresh round of computations was carried out using both Moody’s and S&P ratings.3 Results According to the Moody’s ratings, between May 2012 and July 2012, 10 countries suffered rating/outlook downgrades: Belize, Croatia, Cyprus, Pakistan, Romania, Netherlands, Luxembourg, Germany, Italy and Spain. However, 5 countries experienced rating/outlook