The Brazilian Currency Turmoil of 2002: A Nonlinear Analysis

30 Pages Posted: 5 Jun 2005

See all articles by Manuela Goretti

Manuela Goretti

International Monetary Fund (IMF)

Date Written: May 2004

Abstract

This paper investigates the main sources of instability in Brazil during the currency and financial distress episode of 2002. We test for financial contagion from the Argentine crisis and the high yield market in developed countries as well as for political uncertainty arising from the Brazilian presidential elections and the expected victory of the left-wing candidate in that contest. Markov-switching time-varying transition-probability models, applied to high-frequency data, provide significant evidence for both interpretations, as well as for a strong impact of IMF intervention on Latin American Economics.

Keywords: Brazil, contagion, financial crises, IMF intervention, Markovswitching

JEL Classification: C11, C22, F32, F34, F42

Suggested Citation

Goretti, Manuela, The Brazilian Currency Turmoil of 2002: A Nonlinear Analysis (May 2004). Available at SSRN: https://ssrn.com/abstract=736383 or http://dx.doi.org/10.2139/ssrn.736383

Manuela Goretti (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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