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PART I. THE MEASUREMENT OF POLITICAL RISK

PART I. THE MEASUREMENT OF POLITICAL RISK

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THE MEASUREMENT OF POLITICAL RISK

B. Political Stability

1. Measured by:

a.

Frequency of government

changes

b.

Level of violence

c.

Number of armed

insurrections

d.

Conflict with other states

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THE MEASUREMENT OF POLITICAL RISK

C.



Economic Factors

1. Indicators of political

unrest

a. Rampant inflation

b. Balance of payment

deficits

c. Slowed growth of per

capita GDP

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THE MEASUREMENT OF POLITICAL RISK

D.



Subjective Factors

1. Profit Opportunity

Recommendation

2. Political Risk and Uncertain

Property Rights



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THE MEASUREMENT OF POLITICAL RISK

3. Capital Flight

a. Definition:

the export of savings by a

nation’s citizens because of

safety-of-capital fears.

b. Measurement: use the

balance-of- payment account

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THE MEASUREMENT OF POLITICAL RISK

c.



Causes of capital flight

1.)

2.)

3.)



Inappropriate economic

policies

Expectation of devaluation

High political risk



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PART II. ECONOMIC AND

POLITICAL FACTORS



II.Economic and Political Factors

Primary

focus: How well is the country

doing

economically?

A. Fiscal Irresponsibility

-high government deficits

B. Monetary Instability

C. Controlled Exchange Rate System

-currency usually overvalued

D. Wasteful Government Spending

-inability to service foreign debt

9



ECONOMIC AND POLITICAL

FACTORS



D. Resource Base

-lack of strong work ethic

E. Country Risk and Adjustment to

External Shocks

1.

What are the impacts of

external shocks:

-how well a nation responds

varies

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PART I. THE MEASUREMENT OF POLITICAL RISK

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