Quotation Fink, Gerhard, Haiss, Peter, Paripovic, Ina . 2009. Country Risk of Croatia and the Euro Zone. Is the Pressure Sustainable?. Oxford Journal (published by Association for Business and Economics Research) 8 (1): 65-80.


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Abstract

A need for independent assessment of country risk is not only raised by the global financial crisis, but also by recent findings arguing that sovereign ratings by common rating agencies are designed to encourage capital flows rather than to control for risks arising. We apply the Fink (1981, 1993, 1995) scoring model based on variables that were found to be significant determinants of financial crises to measure the country risk of Croatia and the Euro zone. According to data for the 1998-2007 period, we find that the country risk of the former is increasing, whereas the Euro area shows a relative improvement. Our results are mainly driven by current account (im)balances and external debt levels. We argue that a renewed appreciation of the euro against the USD is hardly sustainable for Croatia, and may also lead to deteriorating results for the Euro zone. The risk of a currency crisis is prevalent for countries tied to the Euro like Bulgaria and Latvia. For the euro area, the EUR/USD-performance is crucial. Short-term public spending to overcome the spillovers from the 2008 global financial crisis runs counter our recommendations for mid-term stabilization measures (decrease in external debt; balanced budget).

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Oxford Journal (published by Association for Business and Economics Research)
Language English
Title Country Risk of Croatia and the Euro Zone. Is the Pressure Sustainable?
Volume 8
Number 1
Year 2009
Page from 65
Page to 80
Reviewed? Y
URL http://www.facultyforum.com/aber/index.htm

Associations

People
Fink, Gerhard (Former researcher)
External
Haiss, Peter (Institut für Europafragen, WU-Wien, Austria)
Paripovic, Ina (Institut BWL Außenhandel, Studentin, Austria)
Organization
Institute for Export Management (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5315 Commercial science (Details)
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