An Empirical Study of the Country Risk of Botswana Using the Beta Approach
DOI:
https://doi.org/10.18533/job.v8i02.308Keywords:
country risk, concurrent research design, autoregressive distributed lag, snowball sampling, BotswanaAbstract
As we live in global village where markets are highly integrated, international investors have capacity and are willing to invest beyond their borders. This has led to voluminous increase in the flow of multinational investments in the two previous decades. Country risk exposure, assessment and measurement are a cause for concerned for all the institutions that are engaged in multinational trade and finance. The main objective of the study is to measure and model country risk for Botswana. A mixed method with concurrent research design was employed. Personal Interviews were the main instrument for collection of primary data. Interviewees were selected through snowball sampling technique. Secondary data was collected from the Botswana Stock Exchange (BSE), Ministry of Finance, Central bank and Central Statistical Office. An autoregressive distributed lag technique was employed on annual data for the period 1994 to 2018 as it suits well small sample size. The major findings of the study revealed that current account and GDP deflator positively influence country risk of Botswana whilst the preceding year beta and short-term interest rates had a negative effect in the long run. The study concluded that the major long run determinants of country risk are current account and GDP deflator. The study also concluded that the main short run driver of country risk for Botswana is current account balance. Effective policies need to be implemented by the authorities to manage persistent current account deficits, external debts and political risk; hence, country risk would be managed.
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