The Russian Default and the Contagion to Brazil

54 Pages Posted: 19 May 2000

See all articles by Ilan Goldfajn

Ilan Goldfajn

Gávea Investimentos; Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Central Bank of Brazil

Taimur Baig

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2000

Abstract

The paper investigates the contagion from Russia to Brazil using several sets of data, with different frequencies and performed several exercises. We analyze this case study under two dimensions: players involved and timing of events. The paper concludes that 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 from Russia was triggered by foreign investors panicking from the Russian crisis and joining local residents on their speculation against the currency. Also, the correlations in the Brady markets are very high and increase significantly (even after adjusting for the bias) during the crisis. This gives support to the fact 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 alternative hypothesis that it was the liquidity crisis in mature markets, and not the Russian crisis, that timed the crisis in Brazil.

Suggested Citation

Goldfajn, Ilan and Baig, Taimur, The Russian Default and the Contagion to Brazil (February 2000). Available at SSRN: https://ssrn.com/abstract=224269 or http://dx.doi.org/10.2139/ssrn.224269

Ilan Goldfajn (Contact Author)

Gávea Investimentos ( email )

Rua Dias Ferreira, 190 7th andar
22431-050 Rio de Janeiro
Brazil

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia DF 70074-900, Distr. Federal 70074-900
Brazil
61-4143232 (Phone)
61-2260767 (Fax)

Taimur Baig

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
(202) 623-8790 (Phone)
(202) 244-4505 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
383
Abstract Views
1,564
rank
56,028
PlumX Metrics