Miller, Marcus, 1941-, Thampanishvong, Kannika and Zhang, Lei, Dr. (2003) Learning to forget? Contagion and political risk in Brazil. Working Paper. Coventry: University of Warwick. Centre for the Study of Globalisation and Regionalisation. (Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation).

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Abstract

We examine whether Brazilian sovereign spreads of over 20 percent 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 (Working 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 Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	Bayesian statistical decision theory, Debts, Public -- Brazil, Contagion (Social psychology) -- Brazil, Brazil -- Economic conditions -- 1985-
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	February 2003
Number:	No.113
Number of Pages:	31
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC)
Grant number:	R000239216 (ESRC)
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URI:	http://wrap.warwick.ac.uk/id/eprint/2007

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