Globalisation and the unpredictability of crisis episodes: An empirical analysis of country risk indexes

The ongoing globalisation process has not put an end to international financial crises. On the contrary, it seems to have contributed to their appearance and to accentuating their degrees of unpredictability. In this context, the main objective of the present study is to establish whether the values of the best-known and most widely used country risk indexes, namely, the Euromoney index and the International Country Risk Group (ICRG), and the values of their representative variables could have forecasted well in advance the crises that took place between 1994 and 2002, a period which is herein termed the ‘globalisation era’. The results show that, although the selected indexes and their representative variables were able to identify certain vulnerabilities, they could not accurately identify the political, economic, and/or financial factors that developed prior to these crisis episodes.