IMF Working Papers

The Russian Default and the Contagion to Brazil

By Taimur Baig, Ilan Goldfajn

October 1, 2000

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Taimur Baig, and Ilan Goldfajn. The Russian Default and the Contagion to Brazil, (USA: International Monetary Fund, 2000) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates the contagion from Russia to Brazil in late 1998 under two dimensions— players involved and the timing of events. The data does not seem to reflect a compensatory liquidation of assets story by international institutional investors. It does contribute, however, to the suspicion that the contagion was triggered by foreign investors panicking from the Russian crisis, and joining local residents on their speculation against the Brazilian real. Adjusted correlations in the Brady market increase significantly during the crisis, which lends support to the view that if there was a contagion from Russia to Brazil, the most likely place of the transmission was the off-shore Brady market. Finally, the paper does not support the hypothesis that it was the liquidity crisis in mature markets, and not the Russian crisis, that timed the crisis in Brazil.

Subject: Balance of payments, Banking, Capital flows, Currency markets, Emerging and frontier financial markets, Financial crises, Financial markets, Stock markets

Keywords: Asia and Pacific, Brady bond market, Brazil, Brazil regression, Capital flows, Central bank of Brazil, Contagion, Currency markets, Emerging and frontier financial markets, Exchange Rate, Market, Market investor, Off-shore Markets, Russia, Stock index, Stock markets, U.S. dollar, WP

Publication Details

  • Pages:

    48

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2000/160

  • Stock No:

    WPIEA1602000

  • ISBN:

    9781451857733

  • ISSN:

    1018-5941

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