Research Seminar - Jesse Schreger (Columbia University, NBER and CEPR) - Country Risk

Research seminars

Jesse Schreger (Columbia University, NBER and CEPR) - Country Risk

Co-authors: Tarek A. Hassan (Boston University, NBER, and CEPR), Markus Schwedeler (Boston University) and Ahmed Tahoun (London Business School)

Abstract

We construct new measures of country risk and sentiment as perceived by global investors and executives using textual analysis of the quarterly earnings calls of publicly listed firms around the world. Our quarterly measures cover 45 countries from 2002-2020. We use our measures to provide a novel characterization of country risk and to provide a harmonized definition of crises. We demonstrate that elevated perceptions of a country’s riskiness are associated with significant falls in local asset prices and capital outflows, even after global financial conditions are controlled for. Increases in country risk are associated with reductions in firm-level investment and employment. We also show direct evidence of a novel type of contagion, where foreign risk is transmitted across borders through firm-level exposures. Exposed firms suffer falling market
valuations and significantly retrench their hiring and investment in response to crises abroad. Finally, we provide direct evidence that heterogeneous currency loadings on global risk help explain the cross-country pattern of interest rates and currency risk premia.


Online Research seminars organized by the Bank of Finland's Research Unit are open to all researchers interested in the subjects covered. Those wishing to attend a seminar are kindly asked to register in advance, by filling in the Online Registration Form

 The registration for each seminar is open until 2:00 pm the day of the seminar. You will receive a link to join the seminar by email at the latest one hour before the seminar is scheduled to begin