Factors Affecting Country Risk Premium: An Analysis For Selected Countries

Investors in different countries make investment location preferences by considering risk situations as well as profit opportunities. In this context, the determination of the factors affecting country risk guides both the decision-making processes of investors and the policy designs of countries in need of foreign resources. The aim of this study is to analyse the determinants of country risk for emerging market economies including Turkey. Using quarterly data for the period 2006-2022, the analysis identifies the factors affecting sovereign risk. The factors included in the designed model and considered to affect country risk are analysed using the Driscoll Kraay method. Geopolitical risk, the ratio of reserves to current account deficit, a dummy variable for the 2008 crisis, exchange rate volatility and the uncertainty index of countries are preferred as explanatory variables. JEL Codes: C33, F39, G19.