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Abstract:
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This article develops an econometric model in order to study country risk behavior for
six emerging economies (Argentina, Mexico, Russia, Thailand, Korea and Indonesia),
by expanding the Country Beta Risk Model of Harvey and Zhou (1993), Erb et. al.
(1996a, 1996b) and Gangemi et. al. (2000). Toward this end, we have analyzed the
impact of macroeconomic variables, especially monetary policy, upon country risk,
by way of a time varying parameter approach. The results indicate an inefficient and
unstable effect of monetary policy upon country risk in periods of crisis. However, this
effect is stable in other periods, and the Favero-Giavazzi effect is not verified for all
economies, with an opposite effect being observed in many cases. |
