Not Everything that Counts Can be Counted: A Critical Look at Risk Ratings and Governance Indicators
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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JOURNAL OF LACEA ECONOMIA,
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- Feldstein, Martin, 2002. "Argentina's Fall: Lessons from the Latest Financial Crisis," Scholarly Articles 2959849, Harvard University Department of Economics.
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