Modeling Australia's country risk: A country beta approach

Michael A.M. Gangemi, Robert D. Brooks, Robert W. Faff, Risk Modeling

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20 Citations (Scopus)

Abstract

The debate on the consequences and appropriate policy response to Australia's growing foreign debt has spawned a large literature. Part of this literature hypothesizes an adverse effect due to increased country risk. This paper analyzes Australia's country risk using a country beta market model in the spirit of Harvey and Zhou (1993) and Erb et al. (1996a, 1996b). Specifically, we analyze the impact of macroeconomic variables, with a special focus on open economy variables, using a regression-based approach. We find that exchange rates are the only macroeconomic factor that has impacted significantly on Australia's country beta.

Original languageEnglish
Pages (from-to)259-276
Number of pages18
JournalJournal of Economics and Business
Volume52
Issue number3
Publication statusPublished - 1 Dec 2000
Externally publishedYes

Keywords

  • Country Beta
  • Risk Modeling

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