02137cas a2200253 a 4500 AALejournalIMF011932 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475504477 1018-5941 BD-DhAAL BD-DhAAL Escolano, Julio. Fiscal Transparency, Fiscal Performance and Credit Ratings / Julio Escolano, Elif Arbatli Saxegaard. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (32 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper investigates the effect of fiscal transparency on market assessments of sovereign risk, as measured by credit ratings. It measures this effect through a direct channel (uncertainty reduction) and an indirect channel (better fiscal policies and outcomes), and it differentiates between advanced and developing economies. Fiscal transparency is measured by an index based on the IMF's Reports on the Observance of Standards and Codes (ROSCs). We find that fiscal transparency has a positive and significant effect on ratings, but it works through different channels in advanced and developing economies. In advanced economies the indirect effect of transparency through better fiscal outcomes is more significant whereas for developing economies the direct uncertainty-reducing effect is more relevant. Our results suggest that a one standard deviation improvement in fiscal transparency index is associated with a significant increase in credit ratings: by 0.7 and 1 notches in advanced and developing economies respectively. Mode of access: Internet Arbatli Saxegaard, Elif. IMF Working Papers; Working Paper ; No. 2012/156 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/156/001.2012.issue-156-en.xml IMF e-Library