A survey of the quantitative approaches to country risk analysis

Abstract The growth of lending to LDCs has been accompanied by attempts to measure risks in such lending. These attempts have concentrated on devising systems which would give an early indication of potential debt servicing difficulties. They are now more commonly called country risk analyses. This paper outlines the development of the study of country risk, concentrating on the contribution of statistical studies. A review of the major studies shows them to contain serious shortcomings with respect to their definition of the dependent variable, the quality and availability of data, specification of models, appropriateness of statistical procedures, and the ability to adequately forecast debt servicing difficulties based on the analysis of past experience.

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