Modelling Country Risk: A Comparative Study of the Botswana and Zambian Economies (1994-2018)
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Date
2022
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Abstract
The study sought to establish annual country betas, identify possible determinants of country risk, assess the impact country risk drivers have on country risk, and establish short run and long run country risk model for Botswana and Zambia. The findings reveal that current account balance positively influences country risk for both countries, whereas beta, GDP Deflator and weighted short term interest rates negatively affect country risk of Botswana, beta, political stability and absence of violence negatively influence country risk of Zambia. The study therefore, concludes that Zambia is at high risk than Botswana because most of the estimated annual betas are bigger than that of Botswana even though the estimated annual betas of the two countries are smaller. The study recommends that the monetary and fiscal authorities of the two countries implement effective polices if country risk is to be managed.
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Country Risk; Country Beta; Risk Analysis; Political Stability