Reconstruction of World Bank Classification of Countries and Moody’s Rating System

This thesis has two main objectives. The first objective is to analyze whether the classification of countries provided by the World Bank (WB) can be reconstructed with a linear and/or integer-programming model known as Multi-Group Hierarchical Discrimination method, using only data published by the WB. The model’s parameters were determined for a collection of 44 countries, and the model was verified using another 39 countries. Moreover, the study examines the relative importance of factors in classification of countries. The second purpose of this study is applying Logical Analysis of Data for country risk rating to provide an approximate rating method. The employed data is available in World Bank and International Monetary Fund and the results are compared with Moody’s rating scale on year 2010. The country risk rating model was established for a collection of 71 countries, and the model was verified using another 34 countries. Furthermore, the study examines the relative importance of economical, environmental, educational, and infrastructure criteria in determining countries risk rating. Keywords: Multi-Group Hierarchical Discrimination, Classification of countries, Country Risk Rating, Logical Analysis of Data