Country Risk Research Articles

The Nexus Among Foreign Direct Investment, Economic Growth, and Country Risk: An Aggregated and Panel ARDL Analysis

ABSTRACT The purpose of this article is to investigate and analyze the relationship among FDI, economic growth, and country risk. Using a panel study, based on data from 131 countries spanning the period of 1995 to 2018, we find that investors prioritize risk perception over economic profits. They tend to favor low risk countries with lower default risk, even if the expected return is also lower. Consequently, advanced countries with reduced default risk attract more capital inflows. Thus, advanced countries with lower default risk attract more capital, and the responses of FDI to the independent variables are rather short in nature.

Higher ultraviolet light exposure is associated with lower mortality: An analysis of data from the UK biobank cohort study

We aimed to examine associations between ultraviolet (UV) exposure and mortality among older adults in the United Kingdom (UK). We used data from UK Biobank participants with two UV exposures, validated with measured vitamin D levels: solarium use and annual average residential shortwave radiation. Associations between the UV exposures, all-cause and cause-specific mortality were examined as adjusted hazard ratios. The UV exposures were inversely associated with all-cause, cardiovascular disease (CVD) and cancer mortality. Solarium users were also at a lower risk of non-CVD/non-cancer mortality. The benefits of UV exposure may outweigh the risks in low-sunlight countries.

Consumer perception of risk towards new sustainable non-thermal food processing technologies: A cross-cultural study between Portugal, Germany, and the UK

Consumers are interested in sustainable and safe food with positive sensory attributes, either minimally processed or incorporating sustainable processes. However, the introduction of new food technologies may generate concern among consumers. This study aims to identify ways to decrease consumers' risk perception of new technologies: High pressure, Non-thermal Plasma, Pulsed Electric Field, and Ultrasound. This cross-cultural study was conducted in three contrasting countries: Portugal, Germany, and the United Kingdom, recruiting over 400 consumers per country. The survey presented twelve constructs based on the Ecological Framework, which was used to predict perceived risk. Factors affecting such perception varied both for technologies and countries, as shown by a multiple regression model. Food technology neophobia, perceived relative severity, and trust were common factors across all countries. This study demonstrates that developing and producing new products using non-thermal technologies should consider the country's consumers' risk perception factors.

Preferential trade agreements as insurance

We investigate preferential trade agreement (PTA) formation when risk averse countries face demand uncertainty and, hence, have an insurance motive for pursuing trade integration. In this environment, when deciding which type of PTA − if any − they wish to form, countries seek to maximise their net welfare; that is, their expected utility less a risk premium. The desire for insurance influences, not just whether a particular PTA forms, but also the preferred depth of integration. We analyze the insurance implications of free trade agreements (FTAs), customs unions (CUs), and countries choosing to stand alone. We further distinguish between shallow CUs and deep CUs; in the former, members maximise the sum of their individual net welfares, while in the latter they maximise the net value of the sum of their individual expected welfares. We show that differences in country risk attitudes and the levels of risk they face, as well as the degree to which these risks are correlated with each other, each, and together, influence the formation and design of TAs. When countries’ demands are uncorrelated, they form a deep CU if their levels of risk aversion are sufficiently different. If, however, their risk attitudes are similar, countries opt for shallower trade integration − either a shallow CU or a FTA − if they face low levels of uncertainty, and choose to stand alone if one country faces a sufficiently high level of uncertainty. When countries’ demands are correlated, they tend to form a deep CU if their demands are strongly negatively correlated, a FTA if their demands are strongly positively correlated and a shallow CU when their demands are weakly correlated. Intuitively, differences in country risk attitudes (i.e., their degree of risk aversion) act as an additional source of comparative advantage. Deeper integration − particularly via a CU − permits less risk averse members to essentially export their relative partiality for risk to more risk averse partners, thereby effectively providing the latter with insurance.

Impacts of the energy transition on public health in the context of country risk: From an international perspective

The global climate issue is becoming increasingly serious, and studying the energy transition (ET) has proven to be an effective solution to this problem. The essence of climate mitigation is to address the issue of ensuring the public health (pH) of human beings. Still, the definitions of ET in existing literature are inconsistent, and Many researches overlook the definitions of ET in official documents and discuss the relationship between ET and pH. Therefore, this research utilizes panel data from 107 countries over the period 2000–2020 to construct an energy transition indicator based on the definition from the World Economic Forum (WEF). It also examines the link between ET and pH using a two-way fixed effects regression. In the current turbulent international environment, this paper also investigates this link in the context of composite risk control (CRC), financial risk control (FRC), economic risk control (ERC), and political risk control (PRC). The results show that ET can significantly improve pH, a conclusion that remains significant after being subjected to a range of robustness tests. The study exploring the mechanism impact on the relationship between ET and pH shows that CRC, FRC, ERC, and PRC all strengthen the effect of ET on pH, and the mechanism effect varies considerably between high-income and low- and middle-income countries (LMICs); ET is more significantly affected by the mechanism in LMICs than in high-income countries. Furthermore, this paper illustrates that ET does not differ by gender in improving pH among infants, while there are gender differences in adults by using the instrumental variable regression and GMM regression to mitigate the endogenous and heteroscedasticity issue for heterogeneity test. The study in this paper can not only inspire policy researchers on which aspects to promote ET, but also provide a direction for improving pH.

Exploring the pathways accounting: Foreign direct investment as a catalyst for idiosyncratic risk, sectoral GDP, economic activity, and economic growth

This study examines the interaction between foreign direct investment (FDI), idiosyncratic risk, sectoral GDP, economic activity, and economic growth in ASEAN countries using structural equation modeling (SEM) performed using AMOS software. The analysis uses data from the ASEAN Statistics Database 2023 to distinguish the significant direct and indirect impacts of FDI on idiosyncratic risks, sectoral GDP, economic activity and aggregate economic growth can. ASEAN, which includes ten Southeast Asian countries, has experienced rapid economic growth and increasing integration in recent decades, making it an interesting area to study these relationships. The study covers a comprehensive period to capture trends and differences among ASEAN member states. Applying SEM with AMOS allows a detailed examination of complex relationships between important economic variables. The results show a clear link between FDI inflows, idiosyncratic risks, industry GDP performance, economic activity, and overall economic growth. More specifically, FDI inflows have a notable direct influence on idiosyncratic risks, which then impact GDP growth by sector, and the level of economic activity and ultimately contribute to economic growth trends. economy more broadly in ASEAN countries. These findings highlight the importance of understanding and effectively managing the dynamics between FDI and various economic indicators to promote sustainable economic development across ASEAN. This information can inform policymakers, investors, and stakeholders in developing targeted strategies and policies that maximize the benefits of FDI while minimizing related risks to promote strong and inclusive economic growth in the region. This study highlights the multifaceted relationships in the ASEAN economic context, emphasizing the need for strategic interventions and policy frameworks to exploit the potential of foreign investment directed at ASEAN, to the Sustainable Development Goals and long-term economic prosperity in the region.

Childhood obesity's impact on cognition and brain connectivity worsens with low family income.

Childhood obesity and its adverse health consequences have risen worldwide, with low socioeconomic status increasing the risk in high-income countries like the US. Understanding the interplay between childhood obesity, cognition, socioeconomic factors, and the brain is crucial for prevention and treatment. Using data from the ABCD study, we investigated how body mass index (BMI) relates to brain structural and functional connectivity metrics. Obese/overweight children (n = 2,356) were more likely to live in poverty and exhibited lower cognitive performance compared to normal weight children (n = 4,754). Higher BMI was associated with multiple brain measures that were strongest for lower longitudinal diffusivity in corpus callosum, increased activity in cerebellum, insula, and somatomotor cortex, and decreased functional connectivity in multimodal brain areas, with effects more pronounced among children from low-income families. Notably, nearly 80% of the association of low income and 70% of the association of impaired cognition on BMI were mediated by higher brain activity in somatomotor areas. Increased resting activity in somatomotor areas and decreased structural and functional connectivity likely contribute to the higher risk of overweight/obesity among children from low-income families. Supporting low-income families and implementing educational interventions to improve cognition may promote healthy brain function and reduce the risk of obesity.

How education policy actors interpret, portray and contest risk in children’s physically active play in schools: a framing analysis

ABSTRACT Children’s physical activity is low and play outdoors has been declining, coinciding with a greater preoccupation with risk in many countries. This study examines how policy actors frame the issue of risk in children’s active physical play in schools. Using a theory-informed, multi-method, qualitative case-study design, 30 participants from a range of sectors involved in policy relevant to children’s physical activity and play in schools participated in interviews and photo-elicitation. Data were analysed using reflexive thematic analysis. Four frames of active physical play in schools were identified. Two ‘risk averse’ frames (protection and productivity) dominated and were primarily expressed by policy actors inside the school system. These frames were characterised by a negative construction of risk, and concerns for adverse outcomes for children and schools. In contrast, two frames were ‘risk tolerant’ (development and flourishing), within which risk was constructed as ‘uncertainty’, which could lead to positive or negative outcomes in play, and supported a child’s holistic learning, development, and wellbeing. While there were some ‘real world’ examples of risk tolerant frames, more commonly they were expressed in the context of how things should or could be in schools. Findings indicate school policies that prioritise injury prevention and productivity goals, may involve a risk-benefit trade-off over other fundamental objectives, elevating some risks above less visible ones, such as the consequences of play and physical activity restriction. Implications for education policy are discussed. Future work should seek to improve understanding of forces contributing to risk averse frames of physically active play in schools and contribute evidence for the benefits of risk-taking for children.

Country Risk to Face Global Emergencies: Negative Effects of High Public Debt on Health Expenditures and Fatality Rate in COVID-19 Pandemic Crisis

Risk is a variation of performance in the presence of events and it can negatively impact socioeconomic system of countries. Statistical evidence here shows that high public debt reduces health expenditures over time and increases the vulnerability and risk of European countries to face health emergencies, such as COVID-19 pandemic crisis. Overall, then, findings suggest that high public debt weakens healthcare and socioeconomic system of countries to cope with crises, such as COVID-19 pandemic, conflicts, natural disasters, etc. JEL Codes: I18; H12; H51; H60; H63

Country risk and political risk under investigation – recent trends, prospects, and implications

For many years, economic growth has been one the main objectives of economies around the world. Recently, the central focus has diverted from the quantitative to the qualitative approach. Mainstream research acknowledged that institutional quality along with country risk is among the most significant factors that contribute to the achievement of high economic development rates. Country risk is associated with the probability that investors or companies from a certain country will face greater instability or losses and includes financial, economic, and political risks. Lower political risk ranks first in the category of main drives that enable countries to attract more foreign direct investments and allow markets to operate efficiently. This article examined the recent evolutions in terms of the concept and main antecedents of the political risks, considering the current negative disruptions that economies were forced to experience, covering aspects related to health, wars, and economic downturns. The analysis identified that a high political risk negatively impacts demographics, environment, and the health system. The ability of countries to bounce back and develop a strong resilient economy toward adverse shocks depends on the institutional quality and the effectiveness of policymakers, who are responsible for elaborating efficient economic policies.

Cross-border sovereign risk transmission in BRICIT Nations: Unveiling asymmetries and the role of country risk premiums

This research highlights the asymmetric interdependence structure among the sovereign risks of Brazil, Russia, India, China, Indonesia, and Türkiye (BRICIT) nations, challenging the traditional view that bilateral trade is the main channel for cross-border spillover effects. Despite their dependence on Russian crude oil imports for energy, the BRICIT nations show no significant sovereign risk interdependence with Russia. The study finds that Indonesia's credit default swap (CDS) has the highest level of interdependence with other nations. Further exploration of alternative transmission channels necessitates an examination of the country risk premium, revealing Türkiye as the most vulnerable nation due to its negative association with the CDS of other countries, particularly India. By contrast, India is identified as a preferred investment destination, thanks to its lower uncertainty and strong GDP growth over the past decade. Additionally, the research underscores China's economic influence, demonstrated by its positive association with all other BRICIT nations. This suggests that despite the high sovereign risk associated with China, investors do not view other emerging markets as viable, lower-risk alternatives. The perceived risk related to China appears to extend beyond its borders, impacting the sovereign risk profiles of other emerging economies.

Do Country Risks Matter for Tourism efficiency? Evidence from Mediterranean countries

Do Country Risks Matter for Tourism efficiency? Evidence from Mediterranean countries

Global exposure to climate change at a subnational jurisdiction level

In the context of climate change, there is a need to identify the most vulnerable "hotspots" to the various risks that should attract the most attention from analysts and decision-makers. In this paper, we focus on territories’ exposure to the main consequences of climate change, considering both intensity and the level of physical exposure to main climate change hazards. We propose a composite indicator that can be computed globally but at the sub-national level, covering 47,138 administrative units in the World (all land but Antarctica). It should be helpful as a first step to assess risks for countries characterized by high geoclimatic diversity but also transboundary risks. It would help identify the most vulnerable subnational administrative units and serve as one tool for adaptation planning.

Risk Analysis of the Development of Sustainable Dongtan

Dongtan is set to be developed as a sustainable urban-rural integration, aiming to attract a wide range of commercial and leisure investments. The Shanghai Industrial Investment Corporation (SIIC), the largest international investment group owned by the Shanghai municipal government, is leading the Dongtan project in partnership with Arup. The project’s risks are categorized into eight major groups: (1) Force majeure, (2) people-related risks, (3) financial and economic risks, (4) political and country risks, (5) environmental risks, (6) completion-related risks, (7) design-related risks, and (8) technology risks. Among these, political risk is particularly notable for its high probability and significant impact. Effective project risk management is essential to foresee and address uncertainties that could jeopardize the project's objectives and timelines. Appropriate strategies must be implemented to manage and mitigate these risks.

Does fintech matter for financial inclusion and financial stability in BRICS markets?

We investigate whether fintech development expedites financial inclusion and affects the stability of the financial sector in BRICS economies. We first seek to identify the linkage between Fintech development and financial inclusion in the BRICS economies. We then explore if Fintech poses any threat to financial stability by studying the impact of Fintech on three main factors of financial stability; Country risk, Liquidity, and Price volatility to see any possible threat to financial stability. We apply the robust Global Vector Autoregressive (GVAR) model with Bayesian framework to analyze a monthly dataset ranging from 2015 to 2022. By applying a positive shock to Fintech over financial inclusion and financial stability, we reveal a positive dynamic relationship between fintech development and financial inclusion, with fintech exhibiting a long-term influence on financial inclusion in some BRICS countries than others. However, we found no significant evidence that fintech presents any threat to financial stability; at least not in the short term. We offer several policy implications and future research directions.

Reassessing environmental protection in international investment agreements: The case of Vietnam

AbstractThe proliferation of international investment agreements reflects the tireless efforts of many governments in the world to attract foreign investment and significantly improve their investment environment, including Vietnam. However, investment overshielding without regard to public policy objectives also has negative consequences, such as indirectly and directly causing environmental pollution at investment sites. Vedan Vietnam and Formosa Ha Tinh Steel are prime examples of ecological incidents with long‐term damage to the host State. Using critical and case study approaches, this article examines the reasons behind those incidents and analyses Vietnam's improper response to the cases. More importantly, the article criticises the lack of alignment of the domestic legal system and international investment law. Finally, the article suggests the interconnected relationship between domestic and international law and recommends treaty‐making directions to avoid the risk of Vietnam and other ASEAN countries becoming a ‘new haven’ of environmental pollution.

Should Developed Economies Manage International Capital Flows? An Empirical and Welfare Analysis*

The literature on the effects of country risk premium shocks has largely focused on emerging market economies. We empirically show that in developed economies, risk premium shocks explain a non‐trivial share of aggregate fluctuations and are key drivers of real activity during crises. Our empirical results and results from a two‐country New Keynesian model indicate that an increase in the risk premium leads to a reduction in aggregate output under monetary union, but not so in countries with flexible exchange rates and independent monetary policy. Model simulations suggest that managing international capital flows enhances welfare in countries under monetary union.

A Critical Analysis of Economic, Political, and Financial Determinants Influencing Location Choices of Foreign Direct Investments

This paper critically examines the determinants influencing the location choices of foreign direct investments (FDI), focusing on economic, political, and financial risks. The research explores how country risks—political stability, corruption levels, and democratic accountability—affect multinational corporations' (MNCs) decisions to invest. It also investigates financial risks, particularly exchange rate volatility, and its impact on FDI, finding that higher volatility deters investment. Additionally, the paper evaluates economic risks such as inflation, GDP, and unemployment rates, revealing their dual role in both attracting and deterring FDI. Using data from various countries, the study concludes that countries with stable governments, low corruption, democratic accountability, stable exchange rates, and healthy economic indicators are more attractive to FDI. This analysis helps MNCs make informed decisions about investing in different international markets.

Stability and risk contagion in the global sovereign CDS market under Russia-Ukraine conflict

As a leading indicator of sovereign debt risk, the performance of the sovereign CDS market during the Russia-Ukraine conflict deserves attention. This paper calculates the marginal net spillover index, constructs the sovereign CDS network based on the index, identifies the important countries in the network, and analyzes the network stability considering the differences in the roles of the countries in the network. By further analyzing the daily sovereign CDS network before and after the Russia-Ukraine conflict, we show the evolution pattern of the risk of the important countries in the network and the main risk contagion paths between countries. The paper shows that the Russia-Ukraine conflict significantly exacerbated the network’s overall risk level and instability. The major transmitters in the sovereign CDS network are characterized by the risk switch from receiving to transmitting, and the major receivers are characterized by the risk switch from latent to manifest. The risk contagion process is characterized by four stages: risk contagion to neighboring countries, risk exacerbation between Russia and Ukraine, further outward spillover, and weakening but persistent spillover. This study helps to provide a reference for investors to mitigate risk contagion in the sovereign CDS market.

Isolating the Effect of Social Risk on MNEs’ CSR Reporting: A New Approach Based on China's Belt & Road Initiative

AbstractThis article highlights CSR disclosure as a strategic response of Chinese multinational enterprises (MNEs) to the social risk they face in host countries. Deviating from prior research that aims to directly measure social risk, we offer a new approach to isolate the effect of social risk by leveraging China's Belt & Road Initiative (BRI) as the research context, under which Chinese MNEs are largely protected from political risk in membership countries but are exposed to substantial social risk from local nongovernment stakeholders. Results from difference-in-differences analyses show that after the enactment of the BRI, Chinese MNEs investing in BRI countries significantly increases their likelihood of CSR disclosure than that of their counterparts investing in non-BRI countries. Further, such effects are more pronounced for state-owned MNEs and MNEs in natural resource industries. This research enriches the international business literature on the relationship between political risk and social risk, and that between corporate political actions and corporate social responsibility.