Country Risk Essay

5062 Words21 Pages
COUNTRY RISK ASSESSMENT USING ITS ECONOMIC AND POLITICAL FACTORS Mentor: Dr. S.K. Mathur Assistant Professor of Economics Department of Humanities and Social Sciences Indian Institute of Technology, Kanpur Submitted by: Suyash Baderiya(Y9616) Undergraduate Student Department of Humanities and Social Sciences Indian Institute of Technology, Kanpur Abstract This paper aims to develop a multiple regression model for country risk assessment using its economic and political factor and analyze the effect of changes in these factors on risk ratings. The ratings are as per Standard & Poor’s sovereign foreign currency sovereign rating. The analysis is based on data for 28 Asian countries provided by some international organizations as well as data from various other trusted organizations. Introduction Currently, country risk is considered as “the probability that a country will fail to generate enough foreign exchange in order to pay its obligation toward the foreign creditors” (Kosmidou et al., 2008, p.1). In the present scenario, where recession and debt has caused many governments to default, the factors that influence the probability of default by a country and the impact they have on it are issue of major concern. Many institutions, like Standard & Poor’s, Moody’s, etc. have developed various methods to assess country risk. These estimates are presented in a form of ratings, which are indicator of probability of default by the country. For our analysis, we are going to use Standard & Poor’s rating. The ratings by Standard and Poor’s are based on the information provided by the debtors themselves and a few other sources. This analysis is mostly based on the past financial history of the country. This paper is an extension of the paper by Raluca, Zizi in 2011. In this paper, we attempt to develop a multiple regression model for assessing

More about Country Risk Essay

Open Document