COUNTRY RISK ASSESSMENT USING DISCRIMINANT ANALYSIS

Abstract

The purpose of this study is to ident(fy the economic and financial variables which affect a country s credit ·worthiness. Once the lariables are ident(fied, a model is developed using discriminant analysis to separate the forty developing countries used in this study into three spec(fic risk categories: (1) low risk, (2) medium risk, and (3) high risk. Several.financialandeconomicvariablesaretested,butonlysixwereconsideredsignificantenoughtobeused in the model. These six variables are gross national product per capita, debt service ratio, export, import, debt outstanding and disbursed as a percentage of GNP and, finally, international reserve to debt outstanding.