Country Risk Research Articles

Examining the Impact of Country Risks on Chinese FDI in Nigeria

This study investigates the relationship between economic risk, political risk, and Chinese foreign direct investment (FDI) in Nigeria. Using correlation analysis, the study initially identifies a weak positive correlation between economic risk and Chinese FDI, and a weak negative correlation between political risk and Chinese FDI. However, due to the weak nature of these correlations, they are deemed insufficient for decision-making purposes. To determine potential causality, a causality test and regression analysis with optimal lag variables were conducted. The results indicate a positive but statistically insignificant relationship between economic risk and Chinese FDI, and a negative but statistically insignificant relationship between political risk and Chinese FDI. These findings suggest that Chinese FDI in Nigeria is not significantly influenced by economic or political risks, aligning with theories that Chinese investments are driven by strategic objectives such as resource acquisition and geopolitical influence. The study did not find any causal relationship between the political risks and economic risk in Nigeria either. The study contributes to FDI literature by challenging conventional determinants of FDI and provides practical implications for policymakers and businesses in aligning strategies with Chinese investment motivations. Future research should explore additional factors influencing Chinese FDI to offer a more comprehensive understanding of these dynamics.

Assessing the nuclear weapons proliferation risks in nuclear energy newcomer countries: The case of small modular reactors

While several nuclear energy newcomer (NEN) countries have shown interest in small modular reactors (SMRs) as a potential energy source, this interest can generate new uncertainties regarding future nuclear weapons proliferation risks. Therefore, this research seeks to determine whether future SMR deployment in NEN countries will contribute to nuclear weapons proliferation, and how the risks can be mitigated. This research uses the Bayesian network statistical approach in conjunction with surveys of experts to assess nuclear proliferation risks when NEN countries deploy SMRs or a large commercial nuclear reactor. The results indicate that an NEN with a strong commitment to the nuclear non-proliferation norms and a stable security environment will experience a lower probability of having higher proliferation risks relative to the United Arab Emirates. Specifically, we demonstrate that experts anticipate a minimal escalation in proliferation risks across different SMR types. Instead, the results show that enrichment or reprocessing (E&R) facilities, if associated with an SMR, exert a substantial influence on proliferation risks. Lastly, implementing a spent nuclear fuel (SNF) retrieval system could serve as an option to mitigate proliferation risks in an NEN country. These findings offer insights for leading nuclear supplier countries to alleviate the potential proliferation risks by NEN countries.

Sovereign Credit Default Swap Market Volatility in BRICS Countries Before and During the COVID-19 Pandemic

SCDS (Sovereign Credit Default Swaps) are becoming more widely used as a country risk indicator after 2008 and stand out for providing real-time information rather than periodic reporting. The COVID-19 pandemic has led to economic disruptions and a decline in international trade. Understanding how the Pandemic affects SCDS return volatility in emerging economies like BRICS forms the motivation for our research. With this study, we aim to determine the impact of the COVID-19 Pandemic on SCDS return volatility in Brazil, Russia, India, China and South Africa, known as the BRICS countries. We used the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model to analyze the data, which consisted of the daily closing price data for SCDS. The date of the first COVID-19 case in each country has been taken as the beginning of the COVID-19 Pandemic in each country. The results of the estimated GARCH models show that the volatility processes of the SCDS return series differ between periods. EGARCH model results indicate that shocks created by news in these countries during the Pandemic have a small and persistent effect on Brazil and Russia's SCDS return volatility, while they have a large and enduring effect on China and South Africa's SCDS return volatility. The findings will guide policymakers and portfolio managers in determining risk management models.

MACROPRUDENTIAL POLICIES AND BANK RISK: DOES LANGUAGE MATTER?

The role of macroprudential policies (MPPs) in influencing bank behavior has expanded significantly in recent years. However, the evidence regarding the impact of MPPs in influencing bank behavior across countries with different Future time reference (FTR) of languages has not been adequately examined. To inform this debate, utilizing bank-level data during 2010–2019, we examine how MPPs affect bank return and risk across countries with varying FTR of languages. The findings show that using MPPs lowers risk in countries with strong FTR. This is manifest in baseline regressions as well as in robustness tests that incorporate additional dimensions of a country’s economic and institutional environment. Over and above, the results show that although borrower- and lender-focused macroprudential measures are equally effective, their efficacy differs, with the former set of instruments being more useful in Emerging Market and Developing Economies (EMDEs). In contrast, the latter holds greater traction in advanced economies.

Empowering Women through Financial Inclusion and Governance: Evidence from 30 Developing Economies

Gender equality is rooted in the capacity of individuals to independently make decisions regarding their social, political, and economic well-being. Unfortunately, women encounter diminished opportunities for engagement in these spheres, particularly evident in developing economies. UN-SDGs has placed gender equality as a 5th goal in the framework. This study aims to elucidate pathways for women empowerment by investigating the moderating influence of governance within the realm of financial inclusion. Panel data analysis has been employed for 30 developing economies for the time of 2004 to 2020.Data sources are World Development Indicators (WDI) and the International Country Risk Guide (ICRG). The labor force participation rate (LFPRF) was employed as a proxy for women empowerment and is treated as dependent variable. Governance and Financial Inclusion were examined as independent variables, with domestic credit to the private sector (DC) representing financial inclusion and governance stability (GS) acting as a proxy for governance. Gross capital formation (GCF) and gross domestic product per capita (GDPPC) were included as control variables. Ordinary Least Squares (OLS), FE, and RE regression models were considered appropriate after applying pre diagnostic tests. The study also employed Arellano Bond model for robustness. The Results indicated that 1 % increase in DC increased LFPRF by 1.05%,16%, and 0.16% in OLS, FE, RE respectively. Similarly, 1 % increase in GS increases LFPRF by 2.49% in OLS model and by 0.13% in both FE and RE model. The study also discussed the strategies to promote women empowerment through planned interventions in financial inclusion and governance.

Keys Determinants of Food Insecurity in Sub-Saharan Africa

This paper identifies the factors that contributed to the persistence of food insecurity (FI) in sub-saharan Africa (SSA) between 1990 and 2019. The sample consists of 29 countries with data obtained from the Food and Agricultural Organisation 2021, World Development Indicators 2021, International Country Risk Guide 2021 and Polity IV 2021 databases. We use the principal component analysis (PCA) to construct the composite food insecurity index. We then employ the average bayesian model (ABM) and the general to specific (GETS) approach for robustness to identify the main determinants of food insecurity in SSA. The PCA result reveals that FI in SSA results from the dimensions of food availability, food utilization and food stability. As for the ABM, results confirmed by the robustness of the GETS approach, indicated that income level, Arable land, demography and lack of democracy are the main determinants that favour FI in SSA. In contrast, rural population and education reduce FI. There is an urgent need in strengthening agricultural strategies and an inclusive distribution of national wealth followed by political accountability in other to fight against FI.

In-person versus electronic screening for social risks among carers of pediatric inpatients: A mixed methods randomized trial

We aimed to compare disclosure of social risks according to self-report on an iPad versus face-to-face questions from a health professional and to explore carers’ experiences of screening. This two-arm, parallel group, randomized trial was conducted from January 19, 2021, to December 17, 2021, in a public hospital pediatric ward serving a disadvantaged area of an Australian capital city. Carers of children aged ≤ 5 years admitted to the Children’s Ward were eligible. The primary outcome was disclosure of social risks. The screener included nine items on food security, household utilities, transport, employment, personal and neighborhood safety, social support, housing and homelessness. Disclosure of social risks was similar between the self-completion (n = 193) and assisted-completion (n = 193) groups for all 9 items, ranging 4.1% higher for worrying about money for food (95% CI − 11.4, 3.1%) among the assisted-completion group, to 5.7% (−1.6, 13.0%) higher for unemployment among the self-completion group. In qualitative interviews, participants were positive about screening for social risks in the hospital ward setting and the majority indicated a preference for self-completion. Conclusion: Differences in the disclosure of social risks according to self- versus assisted-completion were small, suggesting that either method could be used. Most carers expressed a preference for self- completion, which is therefore recommended as the ideal mode for such data collection for Australian pediatric inpatient settings. Trial registration: Australia New Zealand Clinical Trial Registry (www.anzctry.org.au; #ACTRN12620001326987; date of registration 8 December 2020).What is Known:• Most evidence on screening of social risks in pediatric inpatient settings is from the USA.• Little is known about disclosure of social risks in countries with universal health care and social welfare.What is New:• Disclosure of social risks was similar for electronic compared with face-to-face screening.• Carers preferred electronic completion over face-to-face completion.

The Economic Model of the Fixed Exchange Rate in Bolivia: Towards Price Stability and Economic Instability

The objective of this article is to demonstrate and analyze whether the fixed exchange rate is a variable that benefits or harms the Bolivian economy in the short term, medium term and long term. Because it is a fundamental economic variable, mainly to keep prices stable, that is, low and controlled inflation in national prices, this fixed exchange rate has been frozen since 2011. In addition, it regulates or affects foreign trade, i.e., imports and exports, which have been dragging a deficit in the trade balance, which favors imports and smuggling to the detriment of national production and a growing informal labor market. The Bolivian economy is especially dependent on exports without specialization and added value, such as natural gas, minerals, mainly gold, legally and illegally, among others. In addition, the significant deterioration of macroeconomic variables, as reflected in historical data, such as the collapse of savings due to the gradual fall in net international reserves since 2014, leaving the vaults of the Central Bank of Bolivia with scarce reserves in gold and foreign currency, as well as the significant increase in internal and external public debt, Both of them have reached the Gross Domestic Product, at the same time, the increase in public spending in the public sector and public administration in general and the addition of public strategic companies, the latter seeking to replace imports of the productive apparatus, generating a more robust state apparatus and with levels of fiscal deficit recorded in the last ten years and taking into account the progressive subsidies for imports of fuels such as gasoline and diesel in the face of the growing demand for these fuels legally due to the growing vehicle fleet and illegally due to drug trafficking, generating a deficit in the balance of trade. Finally, the levels of corruption and country risk reflected in recent months by specialized institutions in 2023 show a deterioration of the Bolivian economy. Thus, this research will demonstrate the effects of the economic, social, community and productive model with a fixed exchange rate on the Bolivian economy and the effects on macroeconomic variables.

Assessing Country Risk in the Stock Market and Economic Growth Nexus: Fresh Insights from Bootstrap Panel Causality

Investigating the nexus between the stock market and the real economy is vital, as financial markets can play a critical role in economic growth. However, the country's risk factors (political, economic and financial) influence economic growth and financial markets’ nexus. This study examines the role of stock market development and country risk (political, economic and financial) on economic growth, and the moderating influence of country risk in the stock market and economic growth nexus in BRICS economies (except Russia) over the period of 2000 to 2020. The study employed various latest econometrics techniques, including Covariate Augmented Dickey-Fuller (CADF) for identifying unit root problem, Westerlund (2007) test for examining long-run relationship, Cross-sectional auto-distributive lag (CS-ARDL) for estimating long-run relationship, and finally, Konya (2006) for identifying the causal relationship among the variables. The study explored that financial risk, economic risk and political risk is negatively associated with economic growth. However, stock market does not play a significant role in economic growth in this case. The study highlighted a bi-directional causality between economic growth and stock market development. The study also suggests a unidirectional causality from political, economic and financial risk towards economic growth. Finally, the study suggests some policy recommendations based on the empirical results.

Country risk, global uncertainty, and firms’ cash holdings: Do the role of law, culture, and financial market development matter?

To the extent of our knowledge, there is a gap in scrutinizing the impacts of the country's risk and global uncertainty on Asian firms' cash holdings. Therefore, this work aims to shed light on this gap by choosing 989 listed non-financial Asian firms and performing both the static (fixed-effects) and dynamic (Difference-GMM and System‐GMM) panel data methods between 2008 and 2020. The findings reveal that an increase in a country's risk and global uncertainty stimulates firms to stockpile more cash though the impact of country risk is more pronounced. Likewise, the results underscore that among the country risk factors, firms have more precautionary motives to stockpile more cash with increases in financial and political instability while they hold more cash with rises in economic stability. Remarkably, the results emphasize that the impacts of country risk and global uncertainty on cash holdings are more prominent in environments characterized by common-law legal origin, high uncertainty avoidance cultures, and less financial market development. Moreover, the results reveal that firm-specific factors including growth opportunity, leverage, profitability, dividend, and size have an important role in shaping Asian firms' cash holdings policy.

Integrating Risk into the Analysis

Abstract In times of global turbulence, risk management is key to ensuring competitiveness. For the management of manufacturing networks, the analysis of country risks is crucial. Operations managers must identify and manage risks arising from adverse country developments at an early stage. This paper presents a framework to map these risks and their impact on the manufacturing network. Two industry examples show how operations managers can use the approach to analyze and mitigate country-level risks.

A study on the co-movement and influencing factors of stock markets between India and the other Asia–Pacific countries

PurposeThe aim of this study is to examine the nature and determinants of stock market integration between India and other Asia–Pacific countries (Malaysia, Hong Kong, Singapore, South Korea, Japan, China, Indonesia, the Philippines, Thailand and Taiwan) over the period 1991–2021.Design/methodology/approachUnit root tests, the dynamic conditional correlation-Glosten Jagannathan and Runkle-generalized autoregressive conditional heteroscedasticity (DCC-GJR-GARCH), pooled ordinary least squares (OLS) regression and random effects models are employed for the analysis.FindingsThe empirical results show that the DCC between each pair of sample countries is less than 0.5, indicating weak ties between the pairs of sample countries. Also, the DCC between India and other Asia–Pacific stock markets is positive and low, implying low level of integration. The correlation between India and China stock markets is found to be the highest, implying significant level of integration. The main reason for it would be strong economic linkages and bilateral trade relationship between India and China. Moreover, gross domestic product (GDP), interest rate (IR), consumer price index (CPI)-inflation and money supply (MS) differentials are the major driver of stock market integration between India and other Asia–Pacific countries.Practical implicationsThe findings of the study have important implications for investors, portfolio managers and policymakers. It is found that the DCC between India and other Asia–Pacific countries (considered in the study) except China is low, which indicates weak ties between the pairs of sample countries. This implies that the Indian stock market provides good investment opportunities for foreign investors. Also, investors and portfolio managers can attain more diversified benefits and can minimize country risk by investing across Asia–Pacific countries. Further, knowledge about the factors that integrate the Indian stock market with the other Asia–Pacific stock markets will help policymakers frame suitable economic and financial stabilization policies.Originality/valueThis study contributes to the extant literature: first, by examining the linkages of Indian stock market with other Asia–Pacific countries; second, although previous studies confirmed the existence of linkages among the various stock markets, few researchers pay attention to the factors driving the process of stock market integration. This study provides additional evidence by examining the significant macroeconomic factors driving the process of such integration in the Asia–Pacific region considered under the study.

Investment Uncertainties and Economic Growth in Sub-Saharan Africa

Abstract This study investigated the effect of uncertainties, segmented into macroeconomic and political components, on investment in sub-Saharan Africa, with thirty-one countries represented. The analyses were further nuanced to trace the investment-growth link within this set of countries. Two investment types—private and foreign direct—were covered in separate analyses. The sample of countries was chosen through stratified sampling to include oil-exporting, other resource-intensive, and nonresource-endowed countries. The Jorgenson investment model, which explicitly incorporates uncertainty into the investment decision-making process using adaptive and extrapolative approaches, was adopted for the study, and augmented with the partial adjustment model to address the assumption that the user cost of capital adjusts instantaneously. For the two investment types considered, the impartial contract and foreign investment model and the country risk and private investment model were adopted, respectively. The two-way system generalized method of moments technique was employed for estimation. The results showed that foreign direct investment (FDI) in oil-exporting and other resource-intensive countries was only sensitive to macroeconomic uncertainty, while FDI in nonresource-intensive countries was vulnerable to both macroeconomic and political uncertainties. This finding strengthens the belief that, regardless of political instability, natural resources are a major attraction for foreign investors in sub-Saharan Africa. Finally, the study revealed that private investment in the resource-intensive region was primarily affected by macroeconomic uncertainty, whereas its political vulnerability was mainly observed in the oil-exporting and nonresource-intensive regions. To mitigate investment uncertainties in sub-Saharan Africa, it is crucial to focus on minimizing the volatility of interconnected price variables, requiring collaborative efforts.

Global spatially explicit yield gap time trends reveal regions at risk of future crop yield stagnation.

Yield gaps, here defined as the difference between actual and attainable yields, provide a framework for assessing opportunities to increase agricultural productivity. Previous global assessments, centred on a single year, were unable to identify temporal variation. Here we provide a spatially and temporally comprehensive analysis of yield gaps for ten major crops from 1975 to 2010. Yield gaps have widened steadily over most areas for the eight annual crops and remained static for sugar cane and oil palm. We developed a three-category typology to differentiate regions of 'steady growth' in actual and attainable yields, 'stalled floor' where yield is stagnated and 'ceiling pressure' where yield gaps are closing. Over 60% of maize area is experiencing 'steady growth', in contrast to ∼12% for rice. Rice and wheat have 84% and 56% of area, respectively, experiencing 'ceiling pressure'. We show that 'ceiling pressure' correlates with subsequent yield stagnation, signalling risks for multiple countries currently realizing gains from yield growth.

The Heart of the World.

Cardiovascular diseases (CVDs) are the leading cause of mortality globally. Of the 20.5 million CVD-related deaths in 2021, approximately 80% occurred in low- and middle-income countries. Using data from the Global Burden of Disease Study, NCD Risk Factor Collaboration, NCD Countdown initiative, WHO Global Health Observatory, and WHO Global Health Expenditure database, we present the burden of CVDs, associated risk factors, their association with national health expenditures, and an index of critical policy implementation. The Central Europe, Eastern Europe, and Central Asia region face the highest levels of CVD mortality globally. Although CVD mortality levels are generally lower in women than men, this is not true in almost 30% of countries in the North Africa and Middle East and Sub-Saharan regions. Raised blood pressure remains the leading global CVD risk factor, contributing to 10.8 million deaths in 2019. The regions with the highest proportion of countries achieving the maximum score for the WHF Policy Index were South Asia, Central Europe, Eastern Europe, and Central Asia, and the High-Income regions. The Sub-Saharan Africa region had the highest proportion of countries scoring two or less. Policymakers must assess their country's risk factor profile to craft effective strategies for CVD prevention and management. Fundamental strategies such as the implementation of National Tobacco Control Programmes, ensuring the availability of CVD medications, and establishing specialised units within health ministries to tackle non-communicable diseases should be embraced in all countries. Adequate healthcare system funding is equally vital, ensuring reasonable access to care for all communities.

Does country risk rating explain shadow banking development? Insights from advanced and emerging market economies

This study fills a research gap by specifically investigating the effect of country risk rating (CR) on shadow banking (SB) development from a global perspective using a dynamic panel estimation approach covering the period 2010–2019. Furthermore, the study explores whether a country's characteristics impact this nexus by grouping countries into advanced and emerging market economies based on their development level. To the best of our knowledge, few empirical studies have been conducted looking into this relationship from this perspective, and these findings open a new debate in banking literature. The empirical results reveal that CR positively impacts SB in advanced, emerging, and global samples of countries, implying that lower vulnerability to risk factors causes SB expansion. In addition, the results highlight that traditional macroeconomic and institutional factors impact SB development, although the extent of the effect and statistical significance of the factors vary and depend on countries' development levels. Remarkably, the empirical results confirm the validity of the complementarity and regulatory arbitrage hypotheses and support the possible asymmetric implications of monetary policy on SB. The results are robust when alternative model specifications are used and have significant implications for policymakers and regulatory bodies.

Aggravation of global maize yield loss risk under various hot and dry scenarios using multiple types of prediction approaches

AbstractHigh temperature and drought are widely known to cause a reduction of crop yield, but the simultaneously occurring risks in major producing countries and the associated uncertainty across various climate change scenarios remain unclear at the global scale. Here, we evaluate global maize yield loss risk (i.e., the probability of yield reduction by over 10% relative to historical trend yield during 1981–2010) across 30 hot and dry scenarios using regression, machine learning and process‐based models. Besides examining yield loss risk in a single country, we predict the potential risks simultaneously occurring in the top two and top ten producing countries. The three approaches agree on the aggravation of yield loss risk under dry and hot scenarios, but show large discrepancy in the magnitude and sensitivities. Specifically, 2°C warming alone could lead to a global yield loss risk of 73%, 100% and 62% based on regression, long‐short term memory (LSTM) and process‐based models, respectively, and warming‐induced risks can be further aggravated by droughts especially in process models. Global yield loss by over 10% would even become the new norm (i.e., yield loss probability is 100%) when temperature increases by over 2°C in some models. Importantly, the probabilities of yield loss simultaneously occurring in the top two countries (i.e., United States and China) and top ten countries are unexpectedly high and could even become 100% under extreme hot and dry scenarios. Our results highlight the large risks that future climate change may bring to multiple exporting and importing countries simultaneously, thus threating global food market and security. We also emphasize the important value of using different types of prediction approaches for yield projection under hot and dry scenarios, which enables more realistic estimation of uncertainty range than a single type of model.

No Evidence for an Association of HIV and Antiviral Treatment With Changes in Framingham Cardiovascular Risk Score in the Ndlovu Cohort Study.

HIV and antiretroviral therapy (ART) have been associated with increased cardiovascular disease (CVD) risk in high-income countries. The authors studied the longitudinal association between HIV and ART and nonlaboratory Framingham Risk Score (FRS) in a middle-income country. This longitudinal analysis of the NCS (Ndlovu Cohort Study), South Africa used baseline to 36-month follow-up data. Demographics, HIV, ART status, and cardiometabolic measures were obtained. FRS was used as a CVD risk measure. Through linear mixed models, FRS trends over time and the association with HIV were studied. Analysis included 1136 participants, with 609 (54%) having HIV, and 495 (81%) taking ART. At baseline, 9.8% of participants had a high FRS. People living with HIV (PLHIV) had a 3.2% lower FRS than HIV-negative participants (P<0.001). FRS increased similarly for both groups over time. Other factors associated with FRS were secondary and higher education (ß value: -0.075, P<0.001; ß value: -0.084, P<0.001) and alcohol consumption (ß value: 0.011, P<0.001). CVD risk increased for all participants over 36 months, suggesting classic risk factors rather than HIV status or ART to be drivers of CVD risk. People living with HIV had a significantly lower FRS than their HIV-negative counterparts, possibly related to HIV itself or a more frequent interaction with healthcare services. No association of HIV and ART with changes in FRS over 36 months was observed, suggesting the need for research using clinical endpoints to elucidate the effects of HIV and ART on CVD risk. Population-based prevention of CVD risk factors in sub-Saharan Africa is warranted, regardless of HIV status.

ESG engagement, country-level political risk and bank liquidity creation

This study explores the influence of banks' environmental, social, and governance (ESG) performance and country-level risk factors on liquidity creation. Utilizing a distinctive sample of 2103 bank-year observations from 2000 to 2020 in Asia, the study finds that banks' ESG performance exerts a positive impact on bank liquidity creation. Furthermore, this relationship is more prominent in countries with high geopolitical risk and corruption risk and low levels of democratization. To address endogeneity concerns, a two-stage least squares regression is employed using two instrumental variables, and the findings remain robust. These findings have practical implications for banks and policymakers to consider a country's political risk when promoting ESG activities and facilitating liquidity creation.

Supply shock propagation in the multi-layer network of global steel product chain: Additive effect of trade and production

The key to resource security is to make sure supply safety. Due to the difference of resource endowment, however, the distribution of global production and consumption is not matched, so that the supply shock can spread within the multi-layer formed by global supply chains. Therefore, understanding how supply shock spreads within the multi-layer network is critical for policy makers to prevent the propagation of resources crisis. From the perspective of global steel product chain, we constructed a supply shock propagation model based on a multi-layer network and simulated the propagation effect using the steel chain trading data. Results show that: (1) No matter how large the impact strength, only a few countries such as Russia, Ukraine, Brazil and Australia, once the supply shortage of steel upstream products occurs, can affect the downstream products of most countries in the world. (2) If the country's risk resistance is extremely weak, the supply shock propagation in the pig iron network is dominated by trade relations, while crude steel network is dominated by production relations, and steel product network is dominated by the coupling relationship between trade and production. (3) Faced with the risk of complete interruption of exports from different risk sources, the critical points of infection thresholds in importing countries are different. (4) The propagation path of supply risk in the multi-layer network of steel trade presents a multiple hub radial network structure with key countries as the core. These findings help policy makers adjust trade policies in a timely and scientific manner.