This thesis contributes to the empirical literature on country risk. It investigates the determinants of the three most important investment risk in emerging economies: direct sovereign risk (Chapter 1), currency risk (Chapter 2), and indirect sovereign risk (Chapter 3). Chapter 1 estimates default probabilities of 78 emerging economies as a function of economic and political variables and compares them with the default rates associated with the sovereign credit ratings of the two major rating agencies. Chapter 2 identifies the determinants of the South African currency premium to assess the scope for economic policies to narrow the spread on local-currency denominated debt. Chapter 3 analyzes the importance of sovereign risk in determining corporate yield spreads, controlling for firm-specific determinants, and investigates to what extent the practice by rating agencies of not rating companies higher than their sovereign ("sovereign ceiling policy") is reflected in market prices of South African local-currency-denominated corporate debt