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Not Everything that Counts Can be Counted: A Critical Look at Risk Ratings and Governance Indicators

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Author Info
Anja Linder
Carlos Santiso
Abstract

Accurately evaluating country risk and assessing the quality of governance in emerging market economies has become a priority of international corporations, investment banks and multilateral financial institutions. The rating system of the Political Risk Services (PRS) Group, the International Country Risk Guide (ICRG), constitutes one of the most influential time-series databases of country risk analysis. This study assesses the accuracy and predictive powers of the ICRG model, evaluating its ability to discern trends and highlight structural vulnerabilities, and thus to warn of impending crises. Three major crises are examined: the Brazilian financial crisis of 1999, the Argentine economic meltdown in December 2001 and the Peruvian political crisis of 2000. The study finds mixed results, which have important implications for research and policy.

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Publisher Info
Article provided by Nordic Journal of Political Economy in its journal Nordic Journal of Political Economy.

Volume (Year): 29 (2003)
Issue (Month): ()
Pages: 105-132
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Handle: RePEc:noj:journl:v:29:y:2003:p:105-132

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Find related papers by JEL classification:
A10 - General Economics and Teaching - - General Economics - - - General
F35 - International Economics - - International Finance - - - Foreign Aid
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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  1. Martínez, Juan & Santiso, Javier, 2003. "Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies," MPRA Paper 12909, University Library of Munich, Germany. [Downloadable!]
  2. Daniel Kaufmann, 2003. "Rethinking Governance: Empirical Lessons Challenge Orthodoxy," Macroeconomics 0308007, EconWPA. [Downloadable!]
  3. Kaufmann, Daniel & Kraay, Aart, 2002. "Growth without governance," Policy Research Working Paper Series 2928, The World Bank. [Downloadable!]
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This page was last updated on 2009-11-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.