For three countries of similar economic characteristics, I ratify previous studies of the impact of fundamental macroeconomic and foreign exchange variables influencing country risk, as captured by the Emerging Market Bond Index (EMBI). I contribute to existing research, first by calculating a...

This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of...

The COVID-19 crisis has revealed the economic vulnerability of various countries and, thus, has instigated the systematic exploration and forecasting of sovereign default risks. Multivariate statistical and stochastic process-based sovereign default risk forecasting has a 50-year developmental...

Country Risk (CR) is a relevant instrument to analyze and understand economic performances and relationships between different countries in the actual economic and political international globalized context. The present work develops indexes for the European Union countries by applying three...

The main purpose of this paper is to investigate the relationship between the emerging markets and retail internationalization, with a special focus on the markets of Brazil, Russia, India and China, also known as BRIC countries. The paper relies on the fact that the emerging markets, especially...

Interest-rate spreads fluctuate widely across time and countries. We characterize their behavior using some 3,200 quarterly observations for 21 advanced and 17 emerging economies since the early 1990s. Before the financial crisis, spreads are 10 times more volatile in emerging economies than in...

For three countries of similar economic characteristics, I ratify previous studies of the impact of fundamental macroeconomic and foreign exchange variables influencing country risk, as captured by the Emerging Market Bond Index (EMBI). I contribute to existing research, first by calculating a...

In this paper, we investigate how economic, political and institutional factors affect the choice of exchange rate regimes, using data on eight MENA (Middle East and North Africa) countries over the 1984-2016 period. Specifically, we run random-effects ordered probit regressions of the...

In this paper, we investigate how economic, political and institutional factors affect the choice of exchange rate regimes, using data on eight MENA (Middle East and North Africa) countries over the 1984-2016 period. Specifically, we run random-effects ordered probit regressions of the...

This paper uses novel news ticker data to evaluate the effect of sovereign risk on economic and financial outcomes. The use of intraday news enables me to derive policy events and respective timestamps that potentially alter investors’ beliefs about a sovereign’s willingness to service its...

We investigate whether sovereign bond holdings of European banks are determined by a risk-return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period...

We investigate how internal distribution motives can interfere with the economic objectives of capital controls. In order to do this, we provide a model showing that elite capture can affect optimal debt repatriations and the management of official reserves under capital controls. Relying on...

China’s lending boom to developing countries is morphing into defaults and debt distress. Given the secrecy surrounding China’s loans, also the associated defaults remain “hidden”, as missed payments and restructuring details are not disclosed. We construct an encompassing dataset of...

This study investigates the tail dependence structures of sovereign credit default swaps (CDSs) and three global risk factors in BRICS countries using a copula approach, which is popular for capturing the “true” tail dependence based on the “distribution-adjusted” joint marginals. The...

We examine the sustainability of public finances and its determinants for 19 Eurozone countries from 1995 to 2020. We conclude for the existence of panel cointegration between government revenues and expenditures; primary government balance and one-period lagged public debt-to-GDP ratio; and...

Public debt is a very weak predictor of a country's credit rating if a country's other features are not taken into account. However, everything else equal, more public debt is associated with worse ratings. This paper explores the relationship between debt and sovereign creditworthiness by...

This paper proposes a quantitative theory of the interaction between private and public debt in an open economy. Excessive private debt increases the frequency of financial crises. During such crises the government provides fiscal bailouts financed with risky public debt. This response may cause...

In this paper, we investigate how economic, political and institutional factors affect the choice of exchange rate regimes, using data on eight MENA (Middle East and North Africa) countries over the 1984-2016 period. Specifically, we run random-effects ordered probit regressions of the...

This work assesses whether certain indicators constructed from unstructured information published in newspapers contain useful information regarding dynamics of Argentina’s country risk volatility, estimated from a GARCH(1,1) model. The analysis covers the period 1998-2019. One standard...

This paper investigates the risk implications of securitizing the Eurozone sovereign debt as collateralised debt obligations (CDO). The proposal of creating asset-backed securities underpinned by Eurozone sovereign bonds has gained traction since the Eurozone Sovereign Debt Crisis of 2009-2012,...

We provide empirical evidence for the signaling effects of sovereign borrowing on a country’s default risk. Using the S&P sovereign rating as a proxy for default risk, we find significant state-contingent effects of sovereign debt growth on the country’s rating, with the state being the...

In the past three decades, governments in emerging markets have accumulated large amounts of international reserves, especially those with fixed exchange rates. We propose a theory of reserve accumulation that can account for these facts. Using a model of endogenous sovereign default with...

We examine the role of network centrality on idiosyncratic sovereign risk during oil price bubbles by characterizing a high-dimensional network based on data of 60 sovereign credit default swaps over 12 years. By specifying four types of network centrality—degree centrality, betweenness...

Purpose - The study aims to analyze and compare the influence of country-specific fundamentals and global conditions on sovereign risk of Sri Lanka within the sample period of 2006-2019 while employing Treasury bond rates as proxy for sovereign risk. Design/methodology/approach - The determinant...

In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk. We construct bond-level sovereign spreads for dollar-denominated bonds issued...

Financial risk is largely ignored in the tourism literature where most of the research concentrates only on economic or political factors. Hence, we examine the effect of composite country risk, which includes economic, financial and political risks as they all play a significant role in...

What determines sovereign risk? We study the London bondmarket from the 1870s to the 1930s. Our findings support conventional wisdom concerning the low credibility of the interwar gold standard. Before 1914 gold standard adherence effectively signalled credibility and shaved 40 to 60 basis...

We study optimal bailout policies in the presence of banking and sovereign crises. First, we use European data to document that asset guarantees are the most prevalent way in which sovereigns intervene during banking crises. Then, we build a model of sovereign borrowing with limited commitment,...

Most discussions on the social rate of discount have assumed that the economy under consideration is isolated from the rest of the world, and that there are no capital movements. This paper explicitly analyzes the determination of the social rate of discount in a small open developing economy....

This paper shows that FED policy announcements are accompanied with a significant increase in international co-movement in the sovereign CDS market. The effect is strongest for emerging markets, when the FED relaxes unconventional monetary policies, and for countries that are open to the trading...

We find that in a sample of emerging economies business cycles are more volatile than in developed ones, real interest rates are countercyclical and lead the cycle, consumption is more volatile than output and net exports are strongly countercyclical. We present a model of a small open economy,...