Country Risk – Barrier or Key Factor of Globalization

Elena Iliescu and Marilena Ciobanasu

Timisoara Journal of Economics, 2010, vol. 3, issue 3(11), 175-182

Abstract: Country risk and globalization are two terms that at first sight may seem incompatible, globalization meaning opening, expansion of international economic relations, while country risk indicator generates limits or adjustments for the external activities. The present scientific approach aims to demonstrate, both theoretically and empirically, the complementarity, the positive correlation between the two terms. Briefly, all studies conducted by experts, lead to the same conclusion: open economies grow faster. Thereby, the premises for reducing country risk are created as, in general, the increase in the globalization level has led to improved country rating. Of course, there are exceptions. For example, the comparison between the globalization ranking A.T. Kearney with the ratings given by one of the best known rating agencies, Standard & Poor’s has shown that countries with a high rank in the globalization index (Hungary, Portugal) were downgraded, while others, with lower index rank received the same rank. One explanation is represented by the "perverse" globalization effects, which means that not always the effects of globalization on economic and human progress are positive. Of course, it shouldn’t be neglected the fact that the opening led to increased interdependence and therefore of vulnerability. Country risk is not therefore an obstacle to globalization, however, it may be considered one of the factors which led to polarization, to marginalization of poor countries and hence, low listed in the risk rankings. In general however, development of the statistical data within the real economies states the mutual inter-relationship between the two concepts.

Keywords: country risk; index of globalization; cross-compliance; international economic flows; macroeconomic indicators (search for similar items in EconPapers)
JEL-codes: F21 F41 F43 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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