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THE UNDERPINNINGS OF COUNTRY RISK ASSESSMENT
Author(s) -
Schroeder Susan K.
Publication year - 2008
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2007.00541.x
Subject(s) - financial crisis , event (particle physics) , field (mathematics) , economics , object (grammar) , financial risk , capital (architecture) , state (computer science) , country risk , risk assessment , financial risk management , finance , macroeconomics , risk management , history , linguistics , philosophy , physics , mathematics , management , archaeology , algorithm , quantum mechanics , computer science , pure mathematics
This paper surveys the history and current status of country risk assessment. The motivation is to understand why it is that country risk assessors have such a poor track record in anticipating the onset of financial crises. The development of the field reflects changes in the composition of international capital flows. These changes have confounded a definition of country risk, especially if a definition is centered on a particular event. It is then argued that the field has reached an impasse, and this impasse is related to the methods of abstraction and the current crisis of vision within the science of economics. This crisis of vision, as it pertains to theories of financial crises, has led to increased reliance on quantitative methods in the field of country risk. The paper concludes by proposing a new direction for the field, the first step towards which is to recognize that the object of country risk assessment is not to monitor for a particular event or symptom of financial crisis, but, rather, to monitor for a particular state of the economy.