Learning to forget? Contagion and political risk in Brazil
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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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|
|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|Status:||Not Peer Reviewed|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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