Country and Political Risk
First published:
ISBN: 9781782722175
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Capital Flight as a Political Risk Indicator
Michel-Henry Bouchet
Preface: Two economists’ views on the bank-sovereign linkage
Introduction
Assessing Country Risk: A Practical Guide
Sovereign Risk: Characteristics, History and a Review of Recent Research
The Arab Spring: Insights for Political Risk Analysis
The Eurozone Crisis: The Forgotten Risks of Private and External Debt
How the Eurozone Crisis Became a Banking Crisis, and the Risk of Japanisation
The Changing Dynamics of Country Risk
Capital Flight as a Political Risk Indicator
Debt Crisis Indicators of Emerging Markets versus Eurozone Economies
How Much Economic Capital Could European Banks Save? The Case for Optimal Sovereign Risk Allocation
Fixing Fundamental Flaws in Probabilistic Country Risk Models
Have We Learned the Country Risk Management Lessons of the 1997 Asian Financial Crisis?
Using Systems Thinking to Enhance Country Risk Assessment
Approaches to the Quantification of Country Risk
Stress Testing Across International Exposures and Activities
Country risk is no longer what it used to be. It stems increasingly from all the adverse business consequences of the uncertainty surrounding a country’s economic, financial and socio-political situation, not from excessive sovereign debts. As the International Monetary Fund (IMF) summarised it in the midst of the global financial crisis: “Sovereign risks have been transformed in a number of important ways as a direct consequence of the crisis and major fault lines in the financial sector. As the public sector intervened to support financial institutions, distinctions between sovereign and non-sovereign and private liabilities have been blurred, and public exposure to private risks has increased.”11IMF, 2011, “Definition and Measurement of Sovereign Risk Need to be Broadened”, Roundtable, Press Release No. 11/91, Washington, D.C., March 18.
THE END OF INNOCENCE
The traditional divide between developed/emerging countries is obsolete at best, and a source of errors in country risk assessment at worst. This divide adds a conceptual myopia to the complexity of economic, financial and socio-political risk assessment. Emerging market countries with large external debt and little
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