Purpose – The purpose of this paper is to estimate New Zealand's country level risk using a time-varying country beta market model. Country beta is allowed to vary as a function of several macro-economic variables, including the net government overseas borrowing, 90-day bill rate, ten-year bill rate, wool price, trade-weighted index, manufacturers’ price index, retail trade, current account balance, and money supply. Design/methodology/approach – Multivariate regression analysis is used to test the relation between country volatility and the macro-economic variables for the period September 1985 to March 2000. Findings – It is found that the US dollar exchange rate (USD) and the monetary conditions index (MCI) have a significant impact on New Zealand's country beta. The temporal variance of New Zealand's country beta displayed a great deal of volatility prior to and immediately following the 1987 stock market crash. The beta was far less volatile during the 1990s. Research limitations/implications – The variable set is restricted by the availability of data concerning the key macro-economic statistics. Practical implications – Risk at the country level is of increasing importance in the evaluation of offshore investments. Practical implications relate to the evaluation of investments in foreign markets, specifically the appropriate cost of capital, given increased integration of financial markets. Originality/value – The study provides a better appreciation of the relationship between the country beta and several macro-economic variables that has not been applied to the New Zealand economy before.