Country-specific Risks Research Articles

In the shadow of country risk: asset pricing model of emerging market corporate bonds

We examine the covariances of corporate bonds in emerging markets (EM) and present an asset pricing framework using instrumented principal component analysis (IPCA) that includes characteristics at the sovereign and bond levels. Our results indicate that EM bond returns are significantly influenced by country-specific risks. Incorporating these characteristics can improve both the total and cross-sectional model fit. We demonstrate that a factor framework tailored to the nuances of the EM universe generates a significant alpha of 2% per annum against the market and a higher information ratio than alternative asset pricing models, such as a conditional beta model designed for developed market (DM) bonds.

Global, local, or glocal? Unravelling the interplay of geopolitical risks and financial stress

Since the start of the previous decade, regionalization of trade and investment flows has led to complex coupling in local (country-level) and global risks. To-date, little is known about how global uncertainty interacts with local uncertainty across the financial systems. Our study investigates the nexus between global and country-specific Geopolitical Risks (GPRs) and financial stress index (FSI) in five highly-open, large developed economies. We employ the cross-quantilogram and cross-spectral quantile coherency approaches on weekly data over 2000–2022 to show heterogeneous dependency of local and global geopolitical uncertainty on the financial stress conditions. Specifically, our results show that in the U.S. and the UK dependency of local and global geopolitical uncertainty on the financial stress conditions is influenced by the varying market conditions. In contrast, Canadian FSI is intensified by both global and country-level geopolitical risks, whereas German and French financial systems exhibit significant resilience to the global and local geopolitical shocks. Hence, the latter markets show hedging properties vis-a-vis global geopolitical risks.

Socioeconomic disparities in changes to preterm birth and stillbirth rates during the first year of the COVID-19 pandemic: a study of 21 European countries.

Despite concerns about worsening pregnancy outcomes resulting from healthcare restrictions, economic difficulties and increased stress during the COVID-19 pandemic, preterm birth (PTB) rates declined in some countries in 2020, while stillbirth rates appeared stable. Like other shocks, the pandemic may have exacerbated existing socioeconomic disparities in pregnancy, but this remains to be established. Our objective was to investigate changes in PTB and stillbirth by socioeconomic status (SES) in European countries. The Euro-Peristat network implemented this study within the Population Health Information Research Infrastructure (PHIRI) project. A common data model was developed to collect aggregated tables from routine birth data for 2015-2020. SES was based on mother's educational level or area-level deprivation/maternal occupation if education was unavailable and harmonized into low, medium and high SES. Country-specific relative risks (RRs) of PTB and stillbirth for March to December 2020, adjusted for linear trends from 2015 to 2019, by SES group were pooled using random effects meta-analysis. Twenty-one countries provided data on perinatal outcomes by SES. PTB declined by an average 4% in 2020 {pooled RR: 0.96 [95% confidence intervals (CIs): 0.94-0.97]} with similar estimates across all SES groups. Stillbirths rose by 5% [RR: 1.05 (95% CI: 0.99-1.10)], with increases of between 3 and 6% across the three SES groups, with overlapping confidence limits. PTB decreases were similar regardless of SES group, while stillbirth rates rose without marked differences between groups.

Country-specific determinants for COVID-19 case fatality rate and response strategies from a global perspective: an interpretable machine learning framework

BackgroundThere are significant geographic inequities in COVID-19 case fatality rates (CFRs), and comprehensive understanding its country-level determinants in a global perspective is necessary. This study aims to quantify the country-specific risk of COVID-19 CFR and propose tailored response strategies, including vaccination strategies, in 156 countries.MethodsCross-temporal and cross-country variations in COVID-19 CFR was identified using extreme gradient boosting (XGBoost) including 35 factors from seven dimensions in 156 countries from 28 January, 2020 to 31 January, 2022. SHapley Additive exPlanations (SHAP) was used to further clarify the clustering of countries by the key factors driving CFR and the effect of concurrent risk factors for each country. Increases in vaccination rates was simulated to illustrate the reduction of CFR in different classes of countries.FindingsOverall COVID-19 CFRs varied across countries from 28 Jan 2020 to 31 Jan 31 2022, ranging from 68 to 6373 per 100,000 population. During the COVID-19 pandemic, the determinants of CFRs first changed from health conditions to universal health coverage, and then to a multifactorial mixed effect dominated by vaccination. In the Omicron period, countries were divided into five classes according to risk determinants. Low vaccination-driven class (70 countries) mainly distributed in sub-Saharan Africa and Latin America, and include the majority of low-income countries (95.7%) with many concurrent risk factors. Aging-driven class (26 countries) mainly distributed in high-income European countries. High disease burden-driven class (32 countries) mainly distributed in Asia and North America. Low GDP-driven class (14 countries) are scattered across continents. Simulating a 5% increase in vaccination rate resulted in CFR reductions of 31.2% and 15.0% for the low vaccination-driven class and the high disease burden-driven class, respectively, with greater CFR reductions for countries with high overall risk (SHAP value > 0.1), but only 3.1% for the ageing-driven class.ConclusionsEvidence from this study suggests that geographic inequities in COVID-19 CFR is jointly determined by key and concurrent risks, and achieving a decreasing COVID-19 CFR requires more than increasing vaccination coverage, but rather targeted intervention strategies based on country-specific risks.

The connections that bind: Political connectivity in the face of geopolitical disruption

While a firm can minimize its own political risk, there are idiosyncratic and country-specific risks that are more difficult to control. In particular, home country governments pursue their own foreign policies independently of business, forging international linkages with other countries in pursuit of tangible benefits. But what happens when a government forges connectivity to a country which exhibits volatility or generates geopolitical shocks? This paper examines this question by studying the response of European stock markets to the ongoing (since 2014) Russian invasion of Ukraine. Using a variety of metrics to measure political connectivity, we distinguish between anti-Russian governments and governments which are more favorable to Russia during this period, combining this connectivity data with a new database of sanctions and war-related events. Applying asymmetric GARCH, panel estimations, and event study methods, we find that the uncertainty caused by Russian aggression in Ukraine has harmed financial markets in countries such as Serbia and Hungary, countries which have willingly forged connections with Russia during this time. Consistently, our empirical results show that, by tying a country to another one via political means, politicians also have tied the fortunes of their capital markets to the success or failure of this partner.

Country risk factors and banking sector stability: Do countries’ income and risk-level matter? Evidence from global study

Extant literature suggests the essential role of a country's vulnerability in decreasing the stability of the banking sectors. However, the effect of country-specific risks on banking sector stability remains largely understudied. This study specifically examines the impact of country risk, encompassing political, economic, and financial risks, on the banking sector stability from a global perspective. Furthermore, we attempt to provide more insight by answering how this relationship varies by grouping countries based on income and risk levels. To achieve this purpose, we focus on 107 countries and employ a dynamic panel data model (SYS-GMM) between 2004 and 2017. The results indicate that a reduction in a country's vulnerability to specific political, economic, and financial risks, contributes to enhanced stability in the banking sector. This positive effect is particularly pronounced as countries move from low to medium and high-income levels. Furthermore, the study reveals that a decrease in country risk leads to increased banking sector stability in both low and high-risk countries, but the effect is more outstanding in low-risk environments. Moreover, the results highlight the significant influence of banking sector-specific factors and country-level determinants on stability, however, the magnitude and direction of these factors' coefficients depend on the income and risk levels of the countries. The results are robust and can have important suggestions to policymakers, regulators, and bank executives in understating and mitigating risk factors to enhance the stability of their banking sectors.

The environmental impact of pharmaceuticals in Italy: Integrating healthcare and eco-toxicological data to assess and potentially mitigate their diffusion to water supplies.

Pharmaceuticals can reach the environment at all stages of their lifecycle and accumulate in the ecosystem, potentially reaching toxic levels for animals and plants. In recent years, efforts have been made to map and control this hazard. Assessing country-specific environmental risks could drive regulatory actions towards eco-friendlier drug utilization and disposal practices. By starting from a list of 25 environmentally hazardous pharmaceuticals developed by Region Stockholm, we integrated eco-toxicological and 2019-2021 Italian drug utilization data to estimate the environmental impact of pharmaceuticals in Italy. We calculated the risk as the ratio between the predicted environmental concentration (PEC) and the predicted no-effect concentration (PNEC). We found a high risk for levonorgestrel, ciprofloxacin, amoxicillin, azithromycin, venlafaxine, sertraline and diclofenac and a moderate risk for ethinyloestradiol, oestradiol and clarithromycin. This analysis can be periodically performed to identify the pharmaceuticals with the highest risk for the environment and ascertain if containment measures should be implemented.

Does country risk impact the banking sectors’ non-performing loans? Evidence from BRICS emerging economies

This study aims to fill the gap in the literature by specifically investigating the impact of country risk on the credit risk of the banking sectors operating in Brazil, Russia, India, China, and South Africa (BRICS), emerging countries. More specifically, we explore whether the country-specific risks, namely financial, economic, and political risks significantly impact the BRICS banking sectors’ non-performing loans and also probe which risk has the most outstanding effect on credit risk. To do so, we perform panel data analysis using the quantile estimation approach covering the period 2004–2020. The empirical results reveal that the country risk significantly leads to increasing the banking sector’s credit risk and this effect is prominent in the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.105, Q.50 = − 0.131, Q.75 = − 0.153, Q.95 = − 0.175). Furthermore, the results underscore that an emerging country’s political, economic, and financial instabilities are strongly associated with increasing the banking sector’s credit risk and a rise in political risk in particular has the most positive prominent impact on the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.122, Q.50 = − 0.141, Q.75 = − 0.163, Q.95 = − 0.172). Moreover, the results suggest that, in addition to the banking sector-specific determinants, credit risk is significantly impacted by the financial market development, lending interest rate, and global risk. The results are robust and have significant policy suggestions for many policymakers, bank executives, researchers, and analysts.

Asia-Pacific stock market return and volatility in the uncertain world: Evidence from the nonlinear autoregressive distributed lag approach.

This paper examines the effects of three distinct groups of uncertainties on market return and volatility in the Asia-Pacific countries, including (i) the country-specific and US geopolitical risks; (ii) the US economic policy uncertainty; and (iii) the US stock market volatility (using the VIX and SKEW indices). Our sample includes 11 Asia-Pacific countries for the 1985-2022 period. We employ the nonlinear autoregressive distributed lag approach (ARDL) estimation technique to capture the asymmetric effects of uncertainties on market return and volatility, which are documented in the literature. Some findings are documented as follows. First, we find that US uncertainty indices, including US geopolitical risk, US economic policy uncertainty, and US VIX, significantly impact Asia-Pacific stock markets, while the impacts of domestic geopolitical risk and the US skewness index (SKEW) are relatively weak. Second, Asia-Pacific stock markets tend to overreact to uncertainty shocks stemming from US economic policy uncertainty and US geopolitical risk. Third, US economic policy uncertainty has more significant effects than the US geopolitical risk. Finally, our research documents that Asia-Pacific stock markets react heterogeneously to good and bad news from US VIX. Specifically, an increase in US VIX (bad news) has a stronger impact than a decrease in US VIX (good news). Policy implications have emerged based on the findings of this study.

The role of booster vaccination in decreasing COVID-19 age-adjusted case fatality rate: Evidence from 32 countries.

The global COVID-19 pandemic is still ongoing, and cross-country and cross-period variation in COVID-19 age-adjusted case fatality rates (CFRs) has not been clarified. Here, we aimed to identify the country-specific effects of booster vaccination and other features that may affect heterogeneity in age-adjusted CFRs with a worldwide scope, and to predict the benefit of increasing booster vaccination rate on future CFR. Cross-temporal and cross-country variations in CFR were identified in 32 countries using the latest available database, with multi-feature (vaccination coverage, demographic characteristics, disease burden, behavioral risks, environmental risks, health services and trust) using Extreme Gradient Boosting (XGBoost) algorithm and SHapley Additive exPlanations (SHAP). After that, country-specific risk features that affect age-adjusted CFRs were identified. The benefit of booster on age-adjusted CFR was simulated by increasing booster vaccination by 1-30% in each country. Overall COVID-19 age-adjusted CFRs across 32 countries ranged from 110 deaths per 100,000 cases to 5,112 deaths per 100,000 cases from February 4, 2020 to Jan 31, 2022, which were divided into countries with age-adjusted CFRs higher than the crude CFRs and countries with age-adjusted CFRs lower than the crude CFRs (n = 9 and n = 23) when compared with the crude CFR. The effect of booster vaccination on age-adjusted CFRs becomes more important from Alpha to Omicron period (importance scores: 0.03-0.23). The Omicron period model showed that the key risk factors for countries with higher age-adjusted CFR than crude CFR are low GDP per capita and low booster vaccination rates, while the key risk factors for countries with higher age-adjusted CFR than crude CFR were high dietary risks and low physical activity. Increasing booster vaccination rates by 7% would reduce CFRs in all countries with age-adjusted CFRs higher than the crude CFRs. Booster vaccination still plays an important role in reducing age-adjusted CFRs, while there are multidimensional concurrent risk factors and precise joint intervention strategies and preparations based on country-specific risks are also essential.

Geopolitical uncertainty and crude oil volatility: Evidence from oil-importing and oil-exporting countries

By disentangling the effects of the oil-importing and oil-exporting countries, this paper sheds new light on the relationship between crude oil volatility and country specific geopolitical risks using the popular generalized autoregressive conditional heteroskedasticity with mixed data sampling model(GARCH-MIDAS, hereafter) of Engle et al. (2013). We show that crude oil future volatility is more strongly related to the geopolitical risks of oil-importing countries than to that of oil-exporting countries, especially China. The models exploiting this finding lead to significantly better out-of-sample forecast performance and thus have more economic benefit.

Development of risk inventory for hospitals in India

Introduction With the ever-increasing hazards and associated risks in healthcare, the healthcare facilities should have a comprehensive enterprise risk management program. Risk management in Indian Healthcare is nascent and not structured. With the increasing potentially compensable events, workplace violence, cybersecurity threats, complex accreditation standards, old infrastructure and ever-changing legal and political scenarios, the risk inventory is expanding, leading to litigations due to lack of mitigation strategies. This study focuses on developing a comprehensive organization wide enterprise risk inventory for the healthcare facilities in India. Method Secondary data from published studies were collated and 25 risk factors were identified. Interviews with 12 domain experts further identified 38 context and country-specific risks. The identified 63 risks were sent to 20 senior healthcare risk managers. Forty-three risks were unique and were validated by the senior healthcare risk managers. Twenty risks out of 63 identified had similar meaning. These 20 risks were reworded, rephrased and merged into eight risks by the senior healthcare risk managers. The 51 risks were endorsed by the 12 domain experts. The identified risk factors were surveyed among the risk managers from various hospitals to understand the importance and ranking of the risk in the Indian context. Results Sentinel events/Never events appeared in different rank orders and seems to be among the top five risks as perceived by professionals in India. Second highest ranked risk was ‘Staff attrition’. The data analysis showed the different attributes of survey participants, such as the size of the organization with respect to bed capacity and length of time working in the field of risk management. Conclusion The results provide valuable insights into the perception of risk based on hospital size and the educational background of risk managers. This inventory may help hospitals develop strategies for mitigating, controlling and monitoring risks for better hospital management.

International portfolio diversification and the home bias puzzle

We review the literature on equity home bias, a phenomenon stating that investors do not hold enough foreign equities for an optimally diversified portfolio. We begin by defining the home bias measurement and reviewing related evidence on the bias. Further, we consider four explanations for this puzzling phenomenon: barriers to foreign investment, country-specific risks, information asymmetry, and cultural and behavioral factors. We analyze the related theoretical arguments and empirical findings of prior studies within each explanation. Based on the discussion of previous studies, several avenues for future research are suggested. (JEL G11, G15, F41)

Impact of the COVID-19 pandemic on perinatal health and perinatal health inequalities in Europe

Abstract Background The COVID-19 pandemic and lockdowns may adversely affect pregnancy outcomes due to disrupted healthcare provision and increased stress, anxiety and economic hardship. We assessed changes in perinatal outcomes in 2020 using population birth data in Europe. Methods 25 Countries in the Euro-Peristat Network implemented a federated analysis using routine national data. Countries generated anonymised aggregate data files using R scripts from individual-level data formatted to a common data model with 22 variables. We compared preterm birth, stillbirth, neonatal death and caesarean delivery rates in 2020 to 2015-2019 for 2 periods: full-year (FY) and pandemic (March-September [MS]). Data from October onward were not included in the MS period because potentially declining pandemic-related fertility may affect perinatal indicators. Country-specific relative risks (RR) for the periods, adjusted for linear trends, overall and by socio-economic (SES) group, were calculated and pooled using random effects meta-analysis. Results Preterm birth rates decreased slightly (pooled RR: 0.97FY [95% confidence interval (CI) 0.95-0.99]; 0.98MS [0.96-1.00]) in 2020. Heterogeneity was high (I2FY=85%; I2MS=70%), with 5 countries experiencing significant declines. Neonatal mortality rates were unchanged (0.97FY [0.92-1.01]) while stillbirth rates were higher (1.05FY [1.01; 1.09]; 1.10MS [1.02; 1.19]). Caesarean rates were slightly raised (1.02FY [1.00-1.03]; 1.02MS [0.99-1.04], 5 countries had significant increases). Increases for stillbirth were more pronounced in the lowest (1.08FY [0.99-1.16]) versus highest SES group (1.05 FY [0.93-1.17]). Conclusions In 2020, there was an unexpected decline in preterm birth in some countries, while increases in stillbirths and caesarean occurred in others. High country-level heterogeneity suggests that some government policies to mitigate the pandemic might have been more protective of pregnant women and newborns than others.

Setting targets for population health improvements: Trends in perinatal health in Europe over the past five years

Abstract Background The Euro-Peristat network documented disparities in perinatal outcomes between countries in Europe in its reports published every 5 years, but trend analyses were limited because data were not collected annually. Methods Using the Euro-Peristat PHIRI protocol, we estimated rates and assessed trends between 2015 and 2019 for preterm birth, stillbirth, neonatal mortality and caesarean delivery. Country-specific relative risks (RR) for year, modelled as a continuous variable, were estimated and random effects meta-analysis used to generate pooled RRs. Heterogeneity was measured with the I2 statistic (percentage of variability in estimates due to heterogeneity rather than sampling error). Results Stillbirth rates ≥24 weeks of gestational age (GA) varied in 2019 from <2.5 per 1000 births in Denmark, Estonia, Finland and Slovenia to over 4 per 1000 in Belgium, Cyprus, UK Wales and Lithuania. Preterm birth rates ranged from <6% in Lithuania, Finland, Latvia, Estonia and Denmark to 8% or more in Portugal, Belgium, UK Scotland and Cyprus. Fewer than 20% of births were by caesarean in Norway, the Netherlands, Finland, Estonia in comparison to one-third in Cyprus, Ireland, Italy, UK Scotland. Trends over time differed between countries and were not related to the level of the indicator: the pooled RR by year for preterm birth was 0.99 [0.99; 1.00] with five countries having significant decreases and three countries having increases. Caesarean section rates were stable overall (RR: 1.00 [0.99; 1.01]RR:1.00, 95% CI: 0.99-1.01), but with high heterogeneity (I2=99%); in six countries rates increased significantly, whereas in nine rates decreased between 2015 and 2019. Conclusions European countries have varying rates and trends of the principal perinatal health indicators. Investigation of policies in high-performing countries could provide guidance for improvement elsewhere.

Global and Country-Specific Geopolitical Risks and Exchange Rate Volatility: New Empirical Evidence from Indonesia

This paper investigates the conditional predictability of geopolitical risks (GPR) on the rupiah-dollar exchange rate volatility, using 447 monthly observations spanning January 1985 to March 2022. The paper utilizes asymmetric GARCH (1,1) combined with various asymmetric GARCH models, including the integrated GARCH (I-GARCH), the exponential GARCH (E-GARCH), and the threshold GARCH (T-GARCH), and the power asymmetric GARCH (A-PARCH). This study finds convincing evidence that GPRI has a consistent effect on exchange rate volatility, either symmetric GARCH models or asymmetric GARCH models. Interestingly, the global geopolitical risks (GPR) heterogeneously affect the exchange rate volatility of Indonesia. These empirical findings imply that the rupiah-dollar exchange rate volatility is more vulnerable to domestic GPRI than global GPR.

Virusbedingte Exantheme nach Fernreisen

Dermatologische Erkrankungen gehören zu den häufigsten reiseassoziierten Erkrankungen. Einen großen Stellenwert haben insbesondere virale Infektionen mit tropischen und subtropischen, aber auch hierzulande vorkommenden Erregern, die häufig mit Exanthemen und Allgemeinsymptomen einhergehen. Neben genauen anamnestischen Angaben über den Reiseverlauf und mögliche Risikoexpositionen sowie einer gründlichen klinischen Untersuchung ist insbesondere die Kenntnis über länderspezifische Risiken wichtig, um in Kombination mit molekularbiologischen und serologischen Untersuchungen die korrekte Diagnose zu stellen. Anhand eines Fallbeispiels gibt dieser Beitrag eine Übersicht über wichtige virusbedingte Exantheme, die insbesondere bei Reiserückkehrern auftreten können.

Children's disaster knowledge, risk perceptions, and preparedness: A cross-country comparison in Nepal and Turkey.

While children are one of the groups at risk in disasters, they can also take an active part in disaster management, provided that the opportunity is given. This research examined the effect of disaster experience, disaster education, country, and city socioeconomic status on children's perceived risk and preparedness with a survey of 1335 children between 11 and 14 years old, in Nepal and Turkey. The survey used questionnaires and the pictorial representation of illness and self measure (PRISM) tool. Results showed that (1) children's risk perceptions were in line with their country-specific objective risks; (2) there were differences between the countries in relation to perception of risk for all the hazards except wildfire; (3) socioeconomic status had a statistically significant effect on children's perceptions of risk and preparedness for earthquakes, wildfires, that is, children who live in wealthier places had higher perceived risk and preparedness; (4) children in both countries showed similar trends in their knowledge of the correct protective actions to take in the event of a hazard occurrence. However, there is still room to enhance children's knowledge, in terms of safety behaviors, as the children selected many incorrect protective actions. There are important implications in terms of child-centered disaster management which hopefully will make life safer and help to create more resilience to disaster in society as a whole.

Simulation-Based Business Valuation: Methodical Implementation in the Valuation Practice

The simulation-based company valuation values a company on the basis of the risks actually present in the company without having to derive them from the capital market data. The simulation-based company valuation takes into account the market imperfections, such as the probability of insolvency or the lack of diversification, and fulfils the legal requirements and auditing standards for a company valuation. The simulation-based company valuation is an alternative to the CAPM-based company valuation, which, under the assumption of perfect capital markets, derives the risks through capital market comparisons. A simulation-based business valuation has many advantages and is particularly suitable for valuing medium-sized companies, start-ups, companies in a crisis, and for integrating country-specific risks into business valuations. Due to the internationally widespread use of the CAPM, a simulation-based company valuation is still rarely used in practice. This article shows which valuation formulas are necessary for the application of a simulation-based company valuation. These are used for both the certainty equivalent method and for the risk premium method. In a concrete and valuation example, the simulation-based business planning and company valuation is carried out, and the derived valuation formulas are applied in a way that allows a transfer to concrete valuation cases in practice. It is shown that the certainty equivalent method and the risk premium method lead to identical company values.

Identification of the Tourism Risks for Z-Value Based Risk Assessment

Abstract The growing importance of the tourism sector to the global economy contributes to the increase of research in tourism risks assessment. In view of this tendency, the results of research in the field of the risk analysis on tourists’ travels in various countries during the last decades have been analyzed. Commonly used in these studies statistical methods allow to reveal and identify country-specific tourism risks and threats. But it is necessary to underline that relevant statistical data on risks are available not in all cases and countries. Moreover, in most cases, the reliability of the information available is questionable. In order to improve the reliability and quality of the tourist risk assessment, it is proposed to consider tourist travel as a project. The proposed project approach to tourist risk analysis provides an opportunity to go beyond assessment based on available country-specific inferior statistical data and allows to develop a more flexible and versatile method for risk evaluation. Common risk factors and sub-factors for tourists were identified for further risk assessment using suggested by L. Zadeh Z-number. A bi-component Z-number Z = (A, B) with perception-based and imprecise parts A and B, allows taking into account the reliability of the information. Risk experts deal with the prediction like this one “very likely that the level of threat N is medium” or “extremely likely that this factor is very important”. This prediction can be formalized as a Z-number based evaluation and a pack of Z-valuations is considered as Z-information. Experts evaluate identified risk factors and sub-factors and their importance weight using Z-numbers.