Learning to forget? Contagion and political risk in Brazil
Miller, Marcus, Thampanishvong, Kannika and Zhang, Lei (2003) Learning to forget? Contagion and political risk in Brazil. Discussion Paper. London: Centre for Economic Policy Research (Great Britain). Discussion paper (Centre for Economic Policy Research (Great Britain)) (No.378).
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We examine whether Brazilian sovereign spreads of over 20% in 2002 could be due to contagion from Argentina or to domestic politics, or both. Treating unilateral debt restructuring as a policy variable gives rise to the possibility of self-fulfilling crisis, which can be triggered by contagion. We explore an alternative political-economy explanation of panic in financial markets inspired by Alesina (1987), which stresses exaggerated market fears of an untried Left-wing candidate. To account for the fall of sovereign spreads since the election, we employ a model of Bayesian learning and analyse the effects of contagion and IMF commitments.
|Item Type:||Working or Discussion Paper (Discussion Paper)|
|Subjects:||F History United States, Canada, Latin America > F1201 Latin America (General)
H Social Sciences > HJ Public Finance
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Bayesian statistical decision theory, Debts, Public -- Brazil, Contagion (Social psychology) -- Brazil, Brazil -- Economic conditions -- 1985-|
|Series Name:||Discussion paper (Centre for Economic Policy Research (Great Britain))|
|Publisher:||Centre for Economic Policy Research (Great Britain)|
|Place of Publication:||London|
|Official Date:||February 2003|
|Number of Pages:||30|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC)|
|Grant number:||R000239216 (ESRC)|
Agénor, P., Miller, M., Vines, D., and Weber, A. (eds.) (1999) The Asian Financial
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