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Relative Importance of Political Instability and Economic Variables on Perceived Country Creditworthiness

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  • Suk Hun Lee

    (Loyola University of Chicago)

Abstract

This paper examines the relative importance of political instability and economic variables on perceived country creditworthiness. Our results indicate that both political instability and economic variables are taken into account in evaluating country creditworthiness; however, it appears that bankers assign larger weight to economic performances, which we except of reflect longer term political stability. In addition, the frequency of changes in the regime and armed conflict, both proxying for political instability, also affect the credit ratings.© 1993 JIBS. Journal of International Business Studies (1993) 24, 801–812

Suggested Citation

  • Suk Hun Lee, 1993. "Relative Importance of Political Instability and Economic Variables on Perceived Country Creditworthiness," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(4), pages 801-812, December.
    • Handle: RePEc:pal:jintbs:v:24:y:1993:i:4:p:801-812
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    Cited by:

    1. Rasha Alsakka & Owain ap Gwilym, 2010. "Sovereign Ratings and Migrations: Emerging Markets," Working Papers 10009, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    2. Anthony Goerzen & Stephen Sapp & Andrew Delios, 2010. "Investor Response to Environmental Risk in Foreign Direct Investment," Management International Review, Springer, vol. 50(6), pages 683-708, December.
    3. Luis FELIPE Zegarra, 2016. "Political instability and non-price loan terms in Lima, Peru: evidence from notarized contracts," European Review of Economic History, European Historical Economics Society, vol. 20(4), pages 478-525.
    4. P. Hammer & A. Kogan & M. Lejeune, 2011. "Reverse-engineering country risk ratings: a combinatorial non-recursive model," Annals of Operations Research, Springer, vol. 188(1), pages 185-213, August.
    5. Li, He & Refalo, James & Maisondieu-Laforge, Olivier, 2021. "National corruption and international banking," Global Finance Journal, Elsevier, vol. 47(C).
    6. Dailami, Mansoor & Leipziger, Danny, 1998. "Infrastructure Project Finance and Capital Flows: A New Perspective," World Development, Elsevier, vol. 26(7), pages 1283-1298, July.
    7. Ross, Donald G. & Pike, Richard H., 1997. "Export credit risks and the trade credit offer: some Canadian evidence," Journal of Multinational Financial Management, Elsevier, vol. 7(1), pages 55-70, April.
    8. Christopher A. Hartwell & Paul M. Vaaler, 2023. "The Price of Empire: Unrest Location and Sovereign Risk in Tsarist Russia," Papers 2309.06885, arXiv.org, revised Nov 2023.
    9. Neli Tomić-Plazibat & Zdravka Aljinović & Snježana Pivac, 2010. "Risk Assessment of Transitional Economies by Multivariate and Multicriteria Approaches," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(3), pages 283-302, September.
    10. Matkovskyy, Roman & Bouraoui, Taoufik & Hammami, Helmi, 2016. "Analysing the financial strength of Tunisia: An approach to estimate an index of financial safety," Research in International Business and Finance, Elsevier, vol. 38(C), pages 485-493.
    11. Matkovskyy, Roman & Bouraoui, Taoufik & Hammami, Helmi, 2015. "Estimation and prediction of an Index of Financial Safety of Tunisia," MPRA Paper 74573, University Library of Munich, Germany, revised 2016.
    12. Hashmi, Rimsha Karim & Qayyum, Abdul, 2016. "Estimating the Long-Run Creditworthiness of Pakistan," MPRA Paper 70529, University Library of Munich, Germany.
    13. Merve Tuncay, 2018. "Do political risks matter in the financial markets?: evidence from Turkey," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 209-227, June.
    14. Nath, Hiranya K., 2009. "Country Risk Analysis: A Survey of the Quantitative Methods," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(1), pages 69-94.
    15. De Moor, Lieven & Luitel, Prabesh & Sercu, Piet & Vanpée, Rosanne, 2018. "Subjectivity in sovereign credit ratings," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 366-392.
    16. Kalotychou, Elena & Staikouras, Sotiris K., 2006. "An empirical investigation of the loan concentration risk in Latin America," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 363-384, October.
    17. David McKenzie, 2001. "An Econometric analysis of IBRD creditworthiness," International Economic Journal, Taylor & Francis Journals, vol. 18(4), pages 427-448.
    18. Nasierowski, W. & Arcelus, F. J., 1999. "Interrelationships among the elements of national innovation systems: A statistical evaluation," European Journal of Operational Research, Elsevier, vol. 119(2), pages 235-253, December.
    19. Yaser A. AlKulaib & Musaed S. AlAli, 2021. "Examining the Factors Affecting Sovereign Credit Rating of Gulf Cooperation Council Countries," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(1), pages 12-22, January.

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