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Analysis of country risk and taxonomic arrangement

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Abstract

The crisis of international markets following recent events such as the terrorist attacks, the wars in the East, the growing financial globalisation and integration have raised an interest in the analysis of country risk. The Basel Committee suggests the development of risk models in order to make international financial markets more stable. The evaluation of country risk has very often been based on different approaches such as balanced score cards, ratings, structural models, interest yield etc. (Bouchet et al., 2003). One of the issues addressed by researchers has been that of default correlations (Merton, 1974; Ortiz and Rodríguez, 2002). In relation to these issues, this work aims at analysing country risk and at creating a taxonomic classification according to countries’ higher or lower stability as well as to their growth prospects. The methodology of the analysis is based on the analysis of the principal components and on a cluster analysis. The application on 51 countries shows four main types of countries in relation to the country risk. Some concluding remarks and macroeconomics implications conclude the research.

Suggested Citation

  • Mario Coccia, 2004. "Analysis of country risk and taxonomic arrangement," CERIS Working Paper 200414, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
  • Handle: RePEc:csc:cerisp:200414
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    More about this item

    Keywords

    Countries risk evaluation; Economic performance; Comparative studies of countries; Economic growth; Systemic approach;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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