Introduction

Country Risk AnalysisAffordable introductions to Country Risk Analysis are hard to find. Most books on this topic are rather expensive. One book I once came across even had a price tag of over £250. Fortunately you can still buy cheap second-hand copies of the excellent introductions by John Calverley and Thomas Krayenbuehl.

If you are looking for a clear, concise and affordable introduction to country risk analysis, please check the book that features on this page. This book was a co-production of Prof. Dr. Clemens Kool (then working at Utrecht University), Prof. Dr. Tom van Veen (then working at Maastricht University) and me. I was a Country Risk Analyst with a bank back then.

Our book was published 18 years ago and is still used for teaching. Nonetheless, the book has been sold out for years now and the publisher NIBE-SVV never reprinted it. After consulting my two co-authors and our publisher in 2013, it became clear that we all would prefer a re-issue of the book in another form. As a result, you can now download the book as a completely free series of pdf files below.

Aim and Scope of the Book

The aim of this study is to present the state of the art of country risk analysis in 2002-2003. What is country risk? How can country risk be measured? Is it important to pay attention to country risk? What are the main results of research into country risk indicators? How do rating agencies and banks assess country risk and how do they use the results of country risk analysis? These are just a few questions to be addressed in this study. The study focuses on the relation between theory and empirical evidence. We will briefly discuss the management of country risk, in particular in the banking sector.

After the introduction in Chapter 1, the study is organized as follows. Chapter 2 discusses the concept of country risk, the interpretation of country risk and the way country risk is measured. In chapter 3 we discuss empirical research into country risk. Chapters 4, 5 and 6 deal with the practice of country risk analysis. Chapter 4 surveys country risk analyses and ratings that are provided by major credit rating agencies. Because rating agencies have become important providers of country risk analyses, we also discuss how these agencies construct risk ratings. Chapter 5 investigates how central banks and the Bank for International Settlements react to country risk as regards the supervision of commercial banks. In addition, we discuss international evidence of banks with cross-border lending and debt restructuring. Finally, chapter 6 focuses on the question how commercial banks measure and analyse country risk. Chapter 7 presents a summary and conclusions.

Chapter Structure

1 Introduction

2 Theoretical Approaches to Country Risk
2.1 What is Country Risk?
2.2 Theoretical Analysis of Country Risk
2.3 Conclusions

3 Country Risk Analysis: Empirical Results
3.1 Predicting Crises with Quantitative and Qualitative Risk Rating Methods
3.2 Methodological Problems in Empirical Research
3.3 Reproducing Qualitative Risk Ratings with Quantitative Methods
3.4 The Increasing Role of Financial Markets: Emerging Market Debt
3.5 Conclusions

4 Country Risk Analysis by Rating Agencies
4.1 The Suppliers of Country Risk Analysis
4.2 The Construction of Country Risk Ratings
4.3 Is There Much Difference Between Country Risk Indicators?
4.4 Conclusions

5 Banks and Country Risk – External Environment
5.1 Development of Cross-Border Bank Lending
5.2 Debt Restructuring
5.3 The Role of the Dutch Central Bank (DNB)
5.4 The Bank for International Settlements (BIS)
5.5 Conclusions

6 Banks and Country Risk – Internal Organization
6.1 Country Risk Organization of Banks
6.2 Country Risk Analysis at Banks
6.3 Country Ratings and Country Limits
6.4 Economic Capital
6.5 Conclusions

Summary and Conclusions

References

Download The Book

The book is not available as one pdf file as that would have become quite large. Instead, there are pdf files for each chapter with manageable sizes. Please note that although this “re-issue” is now realised in 2021, the book was originally published back in 2003.

“Country Risk Analysis” – Chapter 1
“Country Risk Analysis” – Chapter 2
“Country Risk Analysis” – Chapter 3
“Country Risk Analysis” – Chapter 4
“Country Risk Analysis” – Chapter 5
“Country Risk Analysis” – Chapter 6
“Country Risk Analysis” – Summary and Conclusions

Country Risk Analysis

My Book about Country Risk Analysis (Co-Written with Clemens Cool and Tom van Veen)

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