Lewis W.

Snider Spring Semester 2007 Office Hours: E-mail:

CLAREMONT GRADUATE UNIVERSITY School of Politics and Economics PP 354: WORKSHOP IN POLITICAL RISK ANALYSIS SYLLABUS

McManus 232 621-8697 Wednesday 1:30-3:30 Or by appointment lewiswsnider@roadrnner.com

a developing countrywill affect the business climate in such a way that investors will lose money (and possibly their assets) or not make as much money as they expected when the investment was decided. The focus may be on the general political climate, specific political

This course is grounded on the proposition that bad economics makes good politics. The more that condition prevails in a country, the greater is the magnitude of political risk. A standard definition of political risk is the possibility that political decisions or events in a countryusually

conditions or on specific political and social variables. The primary objective of political risk analysis is to forecast losses. A secondary objective that follows from the first is to suggest means of managing the risk or avoiding the loss. Analysis in this context is, more often than not, low tech and unpretentious. It typically involves, first and foremost, conceiving risk in terms of the political decisions, outcomes or events that can jeopardize the value or the operation of an investment overseas. What is usually missing is any discussion of the political arrangements that create incentives for political leaders to promote economic growth or to undermine the prospects for prosperity. Political Risk Versus Political Science. The workshop is not intended to be another course in quantitative methods, although the more experience you have with data analysis and research design, the better equipped you will be to produce a professional quality finished product. However some topics simply do not lend themselves to the kinds of quantitative analyses that are prevalent in the social science literature. Further, almost all the risk methodologies you review will appear to be very subjective in the selection of characteristics and variables and the weighting or scoring procedures used to code them. The principal objective of this course is to teach you how to set up a problem for applied political analysis. That objective requires you to learn how to ask the right questions so that threat of loss to a particular client and the political incentives for leaders to adopt policies that retard economic growth and block prosperity can be identified, isolated and forecast. Numbers crunching occupies a much lower priority. The course is grounded in political science and economics in that the majority of policy successes or failures lie within the political institutions of sovereign states. Political arrangements create growth-oriented or growth-inhibiting incentives. The notion of risk is distinct from institutional uncertainty. Risk can take a variety of forms, but what they have in common is the degree of confidence that the rules of the game under which a firm made its

calculations of risk and profitability will not change in such a way as to nullify the original calculations. This instability spawns uncertainty and so reduces the attractiveness of
investment.

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Course Objectives. The purposes of this workshop are: To explain the key attributes and processes professional analysts have identified in assessing the political risks to foreign businesses operating in a host country; To introduce the primary methods professional analysts have used to assess and forecast various countries levels of risk. To develop your analytical skills to discern the critical variables needed to assess a particular risk problem and to develop your forecasting techniques for particular analytical situations.

Books Available for Purchase

The books that you will need to purchase if you expect to successfully complete the course are: Bruce Bueno de Mesquita and Hilton L. Root (eds.), Governing for Prosperity. New Haven and London, Yale University Press, 2000 [paper]. William D. Coplin and Michael K. OLeary, Introduction to Political Risk. Hudson, NY: Policy Studies Association, 1983 [paper]. Croton-on-

Llewellyn D. Howell (ed.), The Handbook of Country and Political Risk (3rd ed.). East Syracuse, NY: the PRS Group, 2001 [paper]. Llewellyn D. Howell (ed.) Political Risk Assessment: Concept, Method and Management. East Syracuse, NY: the PRS Group, 2001 [paper]. Jerry Rogers (ed.). Global Risk Assessments: Issues, Concepts and Applications Book 5 [paper]. Hilton L. Root, Capital and Collusion: Political Logic of Global Economic Development. New York: Princeton University Press, 2006.

Readings on Reserve
Jerry Rogers (ed.). Global Risk Assessments: Issues, Concepts and Applications. [Books 1-4] Riverside: Global Risk Assessments, Inc., 1983, 1986, 1988, and 1997 [paper]. Lewis W. Snider, Growth, Debt and Politics: Economic Adjustment and the Political Performance of Developing Countries. Boulder: Westview Press, 1996 [paper]. Dani Rodrik (ed.), In Search of Prosperity: Analytic Narratives on Economic Growth. Princeton and Oxford: Princeton University Press, 2003 [paper] There is no one publication that can serve as a textbook for a course like this. The Bueno de Mesquita Root anthology provides analyses that show how politics is connected to bad economic decisions and outcomes. The good politics and the bad economics in this volume constitute the raw material from which you can construct indicators of political risk. Roots Capital and Collusion is grounded on a similar framework. Thus his book extends the badeconomics/good-politics logic to several specific countries. A different sort of text is William D. Coplin and Michael K. OLeary, Introduction to Political Risk Analysis. This is a type of

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decision tree analysis that shows how to derive the probabilities of various outcomes based on the likely courses of action of certain stakeholders within a political system. The third required reading is as much a reference as it is a text: Llewellyn D. Howell (ed.) The Handbook of Country and Political Risk Analysis (3rd ed.). Apart from an introductory chapter by Howell, the rest of the book consists of chapters from various political risk organizations. The chapters explain their methodologies (albeit not very completely) and include sample country reports. Many of them contain ratings for several countries in recent years, so they also can be a source of raw data for you. The fourth required reading, Political Risk Assessment:, is basically the textbook that is designed to accompany The Handbook of Country and Political Risk Analysis. Ive assigned chapters from my own book, Growth, Debt and Politics, for one simple reason: For all the hype about proprietary methodologies in political risk analysis, very few of these methodologies have any variables that directly gauge the political performance of the state or the strength of its political and economic institutions. Growth, Debt and Politics: helps to remedy that problem. The assigned chapters are put together for you in a reading packet that is on a CD-ROM and can be obtained from me. The series edited by Jerry Rogers, Global Risk Assessments: has been the industry standard for years. Copies of Book 5 are available for purchase in the Huntley Bookstore.

Course Requirements
Weekly Readings and Student Discussants. The main purpose of the assigned readings is to acquaint you with the variety of methodologies and approaches that comprise the field of political risk. Three recurring themes will confront us in the assigned readings. The first is that one reason why there is something called political risk is because bad economics all too often makes for good politics. The second recurring theme is whether politics actually is imbedded in the dominant proprietary methodologies and indicators and if so how? A third recurring theme is the relationship of political risk to economic growth: the working assumption is that the greater the risk the lower the rate of growth. Considerable time will be spent on discussing the measurement validity of these indicators and on considering how it might be improved. Hence we will be concerned not only with indicators of risk but with how to represent the politics that underlies political risk. Politics refers to what political arrangements appear implicitly in the measures and what kind of incentives do they create for political leaders to pursue growth-promoting or growth-retarding policies? Each student is responsible for leading the discussion/critique of one of the weekly reading assignments. Your job is to frame the discussion/debate. For example you can identify problems, strengths or limitations of various methodologies and suggest how the problem might be more successfully addressed. It is the responsibility of the other members of the seminar to raise questions and contribute to the general discussion. Your seminar participation counts

for 15% of your grade.

Term project. Each student will pick a client preferably a firm (e.g., Citibank, Mattel, Paccar, Caterpillar, Apple Computer, Parsons, Motorola, etc.). The term project includes the hard copy of your risk analysis and your oral presentation. The term paper counts for 35% of your grade; the oral presentation counts for 30%. The selection of the topic should be consistent with ones post-graduate career goals. If youre aspiring to a career in international finance, it makes more sense to choose a bank or some other financial institution as a client, than, say, a manufacturing concern. If you have a

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particular interest in the political economy of world oil, you may want to assess the risk of expanding into the Caspian Sea oil fields or one of the many proposed pipelines in what was once Soviet Central Asia. That is more consistent with your long-term career goals than analyzing the political risk associated with acquiring one of the privatized telephone companies in the Free Peoples Democratic Republic of Leg Iron. Next you select a country or region in which your client has a particular interest. You then select a problem the client is facing. One type of client may be concerned about the overthrow of a secular Arab government by Islamic fundamentalists. A firm that exports over half its production to Asia is going to be concerned with the probability of currency devaluation in Korea or Thailand. Companies that have contracts to build power plants, especially nuclear power plants in India, will be interested in the implications of regime transition in India. Whatever client, country, or problem you choose, the focus of each analysis will be to identify the problem, describe a means of analyzing it and then carrying out the analysis. The resulting product should serve as a central element of the students portfolio in a non-academic job search. Each student is expected to have made a topic selection by the third class meeting (February 1, 2007). 1 This is a twopage summary which should include an estimate of what the client stands to loose (in monetary terms) if the worst political outcome or action occurs. Interim Report. For the country you have chosen for your term project use the Prince Model described in William D. Coplin and Michael K. OLeary, Introduction to Political Risk Analysis, to show the political forces behind the political arrangements that either favor or oppose particular market-oriented policies, based on the salience of the issue to the actors, the resources at each actors disposal, and the certainty or firmness of each actors orientation. You will also need to review Chapter 11 in The Handbook of Country Risk Analysis. This is due the class meeting of February 22, 2007 and counts for 20% of your grade.

This course relies very heavily on Internet resources, not only for access to some of the more specialized assigned readings, for the information you will need to successfully complete the four exercises and your term assignment. The following Web sites will minimize your need to search the sources of interest to you. Brady Net Inc. Economic Research (http://eve.bradynet.com/cgi-bin/research/showreports.cgi?source=bt). Formerly Bankers Trust Research BNI provides thorough analyses that focus on Latin America (both specific countries and the region as a whole). Anyone doing serious risk analysis on Latin America should consult BNIs Latin American Economic Forecast. It also provides analyses of other regions, particularly Russia and Asia. BNIs Country Risk Monitor is a valuable resource to consult regardless of your particular country or area concentration. Campbell R. Harveys Finance Glossary (http://www.smithbreeden.com/glossary/glossary.htm). This Site has over 3,000 entries and more than 10,000 hyperlinks (cross-references). I guarantee you will have to use it if for no other reason than some of Harveys stuff is assigned
Since your term projects are likely to be country-specific, one of the most valuable sources you can consult when you first begin your research is The Economist country surveys. Examples include a survey of Egypt in the March 20-26, 1999 issue; another is Japans Stuttering Economic Recovery (November 4, 2000); and a more topical example is Emerging Economies, (April 15, 2000).
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Internet Resources

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reading and you wont understand what hes talking about unless you were a stockbroker in a previous incarnation. Clampbell R. Harveys Country Risk Analysis Homepage. This Web page provides one of the most useful examples of how alternative measures of political, economic and financial risk can estimate the degree to which these kinds of risks can affect returns on the values of portfolios. We will be using materials from this Web page throughout the semester. http://www.duke.edu/~charvey/Country_risk/couindex.htm Center for Latin American Capital Markets (http://www.netrus.net/users/gmorales/index.html). This is a critical source of information and data for anyone who is doing serious risk analysis pertaining to the countries of Latin America. Resources include general economic data, country news and foreign exchange rates and quotes. Central Europe Online (http://www.centraleurope.com/). This is one of the Sites operated by European Internet Network (EIN). The format includes a combination of market news combined with regional economic and political analysis that is invaluable to anyone doing any serious risk assessment in this region. David Neaths Review of the Asian Crisis This is an Australian Site with numerous links to Asian sources that should provide you with a wider perspective on the hypothesized causes of the Asian financial crisis. Come and say Gdie (http://www.man.deakin.edu.au/dneath/sites/asiacrisis.htm). GRA Research Hotlinks (http://grai.com/links.htm). The most resourceful Web site for a course such as this in its organization and the variety of sources directly associated with various aspects of political risk. It provides an excellent tour of the horizon for people unfamiliar with the field and an excellent set of research tools for political risk practitioners. Inside China Today Investor Insight (http://www.invest.insidechina.com/). If China permitted a free press, its version of the Wall Street Journal or the Financial Times would look a lot like this, with a little of The Economist thrown in for good measure. This is one of the Sites operated by European Internet Network (EIN). The quality and content of the material on this Site could not appear in any operation that was not strictly offshore. Internet Center for Corruption Research (http://www.www1.gwdg.de/~uwvw/) is a must visit Web site if youre interested in the problems of loss of income or erosion of asset value attributable to corruption. It publishes the Transparency International (TI) Corruption Perception Index. It is also a repository of academic research on corruption. Latin America Data Base (http://ladb.unmu.edu/). Operated by the Latin American and Iberian Institute at the University of New Mexico, the LADB is basically a wire service in English and Spanish for what is happening throughout Latin America. Nouriel Roubini's Asian Crisis Homepage provides 60 pages of articles, professional papers, data sources and transcripts of speeches by the movers and shakers in international finance. It also provides a long list of links to various banks, government agencies and rating services that make up what is increasingly becoming a truly global capital market. (http://www.stern.nyu.edu/~nroubini/asia/AsiaHomepage.html).

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The Oxford Business Group (http://www.oxfordbusinessgroup.com/) is headquartered in London and Istanbul. It provides economic and political analysis countries in the Mediterranean and Caspian basins. Apart from specialized news headlines about events in the region that seldom are reported in Western news media, the firm provides company profiles, online briefings, (there is also a free briefings sign up) and a list of publications. The latter appear to be in depth economic reports on the following countries: Algeria, Azerbaijan, Egypt, Lebanon, Syria, Turkey, the U.A.E., Jordan Tunisia, Romania, Bulgaria, and Morocco. Political Science Internet Resources (http://www.wcsu.ctstateu.edu/socialsci/polscres.html) Operated by Western Connecticut State University (WCSU) Department of Social Sciences, the International Governments & Politics category provides links to politics, political activities and political organizationsofficial, unofficial and clandestine--all over the globe. Richard Kimber's Political Science Resources (http://www.psr.keele.ac.uk/) This is almost the UKs answer to WCSUs Website minus the section on American government and politics, but the information is organized much differently. The options include Manifestos, Data Archives and Other Politics Websites that are not available on most other Websites. Russia Today (http://russiatoday.com/) This is another one of the Sites operated by EIN. This site concentrates on political and social events and has its own Kosovo Watch page. If you want to do a risk assessment of companies operating in Russia, you need to check out this page and that one that follows. Russia Today Investor Insight (http://www.invest.russiatoday.com/) Another one of the Sites operated by EIN, this site is geared more to the interests of potential overseas investors than the previous Site. But you need to browse both of them if you are going to do any serious political risk analysis for clients operating in or near Russia. STRATFOR, Inc. (http://www.stratfor.com/), email: (info@stratfor.com) is one of the most useful sites you can possibly access. Its like having your own open-source intelligence group working for you. It has produced far superior analysis of crises in the Balkans and the Great Power politics attending them than any other source I can find. It has also produced some very insightful analyses of the Chinese and Japanese economies and the Asian economic crisis in general. If any of you can learn to write analyses like these folks, youll never be hurting for a job! The University of Michigan, Political Science Resources / International Politics This is an exhaustive and comprehensive archive on individual countries as well as military affairs. Do you want to contact organizations like Hamas? You can do it via this Website! Just click on Hamas Unofficial Website. (http://www.hamas.org/index.html). Other archives include one on NonWestern sources of political issues, and political parties, organizations and movements around the world (http://www.lib.umich.edu/libhome/documents.center/psfp.html). World Area Studies Internet Resources (http://www.wscu.ctstateu.edu/socialsci/area.html). Unreconstructed area specialists will think theyve died and gone to heaven. The Site is operated by Western Connecticut State University and contains a wealth of official and official sources and links to every region in the world.

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World Banks Doing Business database (http://rru.worldbank.org/DoingBusiness/default.aspx). This may be one of the most important Web Sites you visit for the purposes of this seminar. The data base includes indicators on contract enforcement (number of independent procedural steps counted from the moment the plaintiff files the lawsuit in court until the moment of actual payment; the associated time, in calendar days; the cost as a percentage of GNI per capita; and a procedural complexity index. Data are also on your CD in the folder Business Regulation and Enforcement. You will probably get the most benefit from your initial explorations if you begin with Global Risk Assessments GRA Research Hotlinks (http://grai.com/links.htm). Finally it is assumed that all participants in the seminar have successfully completed a basic statistics course. However, if you have not used these skills in a while, you may wish to use an electronic reference, Statsoft, Inc. http://www.statsoftinc.com/textbook/stathome.html. A copy of Statsofts treatment of factor analysis is included in your reading packet. A course outline and reading list is attached.

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COURSE OUTLINE
PART ONE: THE POLITICAL RISK ENVIRONMENT
Jan. 18 Meeting 1: Organization Meeting: What is Political Risk? a. Risk versus Uncertainty b. Changes in sources of risk c. Research sources Meeting 2: The Social Foundations of the Political Risk Environment a. Risk versus uncertainty b. Can democratic institutions reduce political risk? c. The logic of political survival vs. the logic of good governance. Assigned Reading Hilton L. Root, Capital and Collusion: Political Logic of Global Economic Development, Chapters 1-3. Bruce Bueno de Mesquita and Hilton L.Root, Governing for Prosperity, Chapter 2. Nathan Jensen, Measuring Risk: Political Risk Insurance Premiums and Domestic Political Institutions. Department of Political Science Washington University (2005). 2 Feb. 1 Meeting 3: The Political Economy of Political Risk a. Risk versus uncertainty b. Putting politics back into political risk c. The political economy of political risk: When bad economics is good politics d. Paper topic due today Assigned Reading Bruce Bueno de Mesquita and Hilton Root, Governing for Prosperity, Chapters 1, 3. Bueno de Mesquita and Root, The Political Roots of Poverty: The Economic Logic of Autocracy, The National Interest, 68 (Summer 2002). Bueno de Mesquita, Political Instability as a Source of Growth, Hoover Institution Essays in Public Policy (March 2000). Bueno de Mesquita and George W. Downs, Development and Democracy, Foreign Affairs, 84, 5 (September/October 2005). Root, Capital and Collusion, Chapters 6, 8.
2

Jan. 25

A indicates the reading can be found on the reading packet CD.

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Feb. 8

Meeting 4: Defining and Operationalizing Political Risk a. Explaining political risk b. Political risk typologies c. Institutional legacies and government performance Assigned Reading Llewellyn D. Howell, Defining and Operationalizing Political Risk, in Llewellyn D. Howell (ed.), Political Risk Assessment: Concept, Method and Management. (Hereafter Political Risk Assessment) Charles F. Doran and Roberto Dondisch, What Happened to the Politics In Political Risk Analysis? in Jerry Rogers (ed.), Global Risk Assessments: Issues Concepts and Applications, Book 5 (Hereafter GRA 5) Llewellyn Howell, Politically Based Losses to Foreign Investors: Concept and Measurement, in Jerry Rogers (ed.), Global Risk Assessments: Issues Concepts and Applications, Book 4 (Hereafter GRA 4), [Library Reserve] Lewellyn D. Howell and Brad Chaddick, Models of Political Risk for foreign Investment and Trade: An Assessment of Three Approaches, Columbia Journal of World Business 29, 4 (Fall 1994): 70-91. Suggested Readings R.J. Rummel and David A. Heenan, How Multinationals Analyze Political Risk, Harvard Business Review (January-February, 1978). [Library Reserve]

PART TWO: POLITICAL RISK AND GOVERNMENT PERFORMANCE

Feb. 15 Meeting 5: Political Risk and the Performance of Government a. How do you conceive politics? b. Measuring government performance c. The dimensions of government performance Assigned Readings Lewis W. Snider, Growth, Debt and Politics: Economic Adjustment and the Political Performance of Developing Countries, Chapts. 1-3. [Library Reserve] Yi Feng, Political Freedom, Political Instability, and Political Uncertainty: A Study of Political Institutions and Private Investment in Developing Countries, International Studies Quarterly, 45, 2 (June 2001). Root, Capital and Collusion:, Chapter 5. Bueno de Mesquita and Root, Governing for Prosperity, Chapter 8.

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Feb. 22

Meeting 6: Governance, Patronage and Political Risk a. The political advantage (to governments) of information asymmetries b. Corruption in democratic India, vs. authoritarian China. c. Social injustices in distribution and economic growth d. Interim report due today Assigned Readings Bueno de Mesquita and. Root, Governing for Prosperity, Chapter 4. Root, Capital and Collusion:, Chapters 7-8. World Banks Doing Business database: http://rru.worldbank.org/DoingBusiness/default.aspx). Also in the M Drive and on your CD under Business Regulation and Enforcement. Evaluate contract enforcement indicators. Suggested Readings Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert Vishny, The Quality of Government, Journal of Economics, Law and International Organization, 15, 1 (April 1999). Eric Friedman, Simon Johnson, Daniel Kaufmann, and Pablo Zoido-Lobaton, Dodging the Grabbing Hand: The Determinants of Unofficial Activity in 69 Countries, Journal of Public Economics 76 (2000). Joel Hellman, Geraint Jones, and Daniel Kaufmann, Beyond the Grabbing Hand of Government in Transition: Facing up to State Capture by the Corporate Sector, Transition, 11, 2 (April 2000). Joel Hellman, Geraint Jones, Daniel Kaufmann and Mark Shankerman, Measuring Governance, Corruption and State Capture, The World Bank, Policy Research working Paper 2312, April 2000.

March 1

Meeting 7: Political Risk and Government Instability a. Opacity as a surcharge on foreign direct investment b. Political instability vs. policy instability c. Achieving investment and growth in the face of political instability d. Losses due to deterred foreign direct investment Assigned Readings PriceWaterhouseCoopers, The Opacity Index (January 2001).

Investment (April 2001).

PriceWaterhouseCoopers, Investigating the Costs of Opacity: Deterred Foreign Direct The Kurtzman Group, The Opacity Index 2004 http://www.kurtzmangroup.com/opacity_index.htm

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The Kurtzman Group, The Global Costs of Opacity, 2004 http://www.kurtzmangroup.com/opacity.pdf Aymo Brunetti and Beatrice Weder, Investment and Institutional Uncertainty: A Comparative Study of Different Uncertainty Measures. Washington, D.C.: The World Bank, Technical Paper Number 4 1997. [Library Reserve] Bueno de Mesquita and Root, Chapters 6. Suggested Readings Thomas L. Brewer, The Instability of Governments and the Instability of Controls on Funds Transfers by Multinational Enterprises: Implications for Political Risk Analysis, Journal of International Business Studies (Winter 1983). Principal Components Analysis, Statsoft, Inc. http://www.statsoftinc.com/textbook/stathome.html.

PART THREE: GENERATING INFORMATION AND DATA

March 8 Meeting 8: The Foundation of Political Risk: Quantified Judgment a. Transforming information into data b. The Use of Area Experts in Political Risk c. The Delphi Technique and Political risk Assigned Readings Llewellyn D. Howell, Area Specialists and Expert Data: The Human Factor in Political Risk Analysis, GRA 2. [Library Reserve] Justin J. Green and Daniel Druckman, Experts in Political Risk Analysis: A Risky Basis for Estimates, in GRA 2. [Library Reserve] Illinois Institute of Technology, The Delphi Method and Cross Impact Matrix Method of Forecasting

Gerd Hagmeyer-Gaverus and Mikael Weissmann, Early Warning Indicators for Preventive Policy: A New Approach in Early Warning Research. Sipri, Stockholm International Peace Research Institute (March 2003)
Suggested Readings The Economist, Countries in Trouble, (December 20, 1986): 69-72. [Library Reserve] Helmut Reisen, Domestic Causes of Currency Crises: Policy Lessons for Crisis Avoidance, OECD Development Centre Technical Papers No. 136 (June 1998).

March 15

SPRING BREAK

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March 22

Meeting 9: Validating Alternative Risk Assessments a. Discriminating between political, financial and economic risk b. Projections of conditions/attributes c. Projections of actions that directly affect loss d. Validating risk measures with statistical analysis Assigned Readings Llewellyn D. Howell, Government Attributes in Political Risk, in Political Risk Assessment. Anja Linder and Carlos Santiso, Assessing the Predictive Powers of Country Risk Ratings and Governance Indicators, In GRA 5. Lewis W. Snider, Political Risk: The Institutional Dimension. International Interactions, 31, 3 (July-September 2005). Lewis W. Snider, Comparing Measures of Economic Freedom: The Good, the Bad and the Data, In GRA 5. [Library Reserve] Steve H. Hanke and Stephen J.K. Walters, Economic Freedom, Prosperity, and Equality: A Survey, The Cato Journal, 17 2 (Fall 1997).

March 29

Meeting 10: Country Risk and Creditworthiness a. Forecasting the Mexican Meltdown of 1994 b. Special problems of sovereign lending c. Financial liberalization and financial crises d. The problem of cross-border exposure in large financial institutions Assigned Readings Sandra D. Williamson, Mexico in 1994: Devaluation Should Not Have Been A Surprise, in GRA 4. [Library Reserve] Lewis W. Snider, The Political Performance of Third World Governments and the Debt Crisis, American Political Science Review, 84, 4 (December 1990): 1263-1280. Chad Rudman, Just How Good Are Emerging-Market Indexes? Institutional Investor. 30, 6 (June 1996). Roger E. Shields, Managing Country Risk in Large Financial Institutions, in Political Risk Assessment. Nadeem U. Haque, Nelson Mark, and Donald J. Mathieson, The Relative Importance of Political and Economic Variables in Creditworthiness Ratings. IMF Working Papers, WP/98/46 (April 1998). Suggested Readings Institutional Investor, Rating Country Risk, 13, 9 (September 1979).

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April 5

Meeting 11: Sovereign Credit Ratings a. Political variables and creditworthiness b. Rating services and economic crises: reactive or preventive? c. Do rating announcements have an impact on perception of sovereign risk? d. Sovereign ratings and the financial crises in Mexico and Asia Assigned Readings Root, Capital and Collusion:, Chapter 10, pp. 354-359 only Richard Cantor and Frank Packer, Determinants and Impact of Sovereign Credit Ratings, in GRA 4. [Library Reserve]. Roger P. Nye, Sovereign Credit Ratings: A Subjective Assessment, in GRA 4. Christopher Huhne. Fitch-IBCA Ratings, After Asia: Some Lessons of the Crisis. (January 1998). Guillermo Larrain, Helmut Reisen and Julia von Maltzan, Emerging Market Risk and Sovereign Credit Ratings, OECD Development Centre Technical Papers No. 124 (April 1997). [Library Reserve] Nadeem Ul Haque, Donald Mathieson and Nelson Mark, Rating the Raters of Country Creditworthiness, Finance and Development, 34, 1 (March 1997). Suggested Readings Anton P. Mueller, On the Utility of the Price Index and the Government Budget as Country Risk Indicators, in GRA 2. [Library Reserve] Helmut Reisen and Julia von Maltzan, Boom and Bust and Sovereign Ratings, OECD Development Centre Technical Papers, No. 148, (June 1999). [Library Reserve]

April 12

Meeting 12: Managing Political and Country Risk a. Risk management strategies: The potential of the Selectorate Model b. The role of the civil service in reform c. Problems of transparency/opacity Assigned Readings Root, Capital and Collusion:, Chapters 9-10, Conclusion

Assessment.

Llewellyn D. Howell, Dealing with Political Risk: A Managers Toolkit, in Political Risk Gerald T. West, Managing Project Political Risk, in Political Risk Assessment. William E. Dugan, Planning to Deal with Risk: A Case Study in Political Risk Assessment.

Gerald T. West and Keith Martin, The Resurgence of Political Risk Insurance, in Political Risk Assessment.

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Daniel Wagner, Insurance as Management, in Political Risk Assessment.

PART FOUR: STUDENT PRESENTATIONS INDIVIDUAL RISK ANALYSES

April 19 April 26 May 3 Meeting 13: Assigned Readings (Readings to be assigned by presenter(s)) Meeting 14: Assigned Readings (Readings to be assigned by presenter(s)) Meeting 15: Assigned Readings (Readings to be assigned by presenter(s))

May 10

Final drafts of assignments must be turned in to avoid an incomplete

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