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An empirical model of the Brazilian country risk -- an extension of the beta country risk model

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  • Joaquim Andrade
  • Vladimir Teles

Abstract

This paper develops a statistical model to study the Brazilian country risk using a country beta model in the spirit of Harvey and Zhou (1993), Erb et al. (1996a, b) and Gangemi et al. (2000). Specifically, the impact of macroeconomic variables is analysed using a time-varying parameter approach. An extension of the original model is applied in order to verify the parameters' stability over time. It is found that monetary policy had a significant and stable impact on Brazil's country risk and international reserves presented a significant impact only during the fixed exchange rate period.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 11 ()
Pages: 1271-1278

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Handle: RePEc:taf:applec:v:38:y:2006:i:11:p:1271-1278

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  1. Gangemi, Michael A. M. & Brooks, Robert D. & Faff, Robert W., 2000. "Modeling Australia's country risk: a country beta approach," Journal of Economics and Business, Elsevier, vol. 52(3), pages 259-276.
  2. Marcio Gomes Pinto Garcia & Tatiana Glindmeier Didier Brandao, 2001. "Taxa de Juros, Risco Cambial e Risco Brasil," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 031, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  3. Abell, John D. & Krueger, Thomas M., 1989. "Macroeconomic influences on beta," Journal of Economics and Business, Elsevier, vol. 41(2), pages 185-193, May.
  4. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
  5. Bernard Dumas, 1994. "A Test of the International CAPM Using Business Cycles Indicators as Instrumental Variables," NBER Working Papers 4657, National Bureau of Economic Research, Inc.
  6. Assaf Razin & Efraim Sadka, 2001. "Country Risk and Capital Flow Reversals," NBER Working Papers 8171, National Bureau of Economic Research, Inc.
  7. Harvey, Campbell R. & Zhou, Guofu, 1993. "International asset pricing with alternative distributional specifications," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 107-131, June.
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Cited by:
  1. Sveshnikov, Sergey & Bocharnikov, Victor, 2009. "Modeling risk of international country relations," MPRA Paper 15745, University Library of Munich, Germany.
  2. repec:ebl:ecbull:v:7:y:2008:i:14:p:1-12 is not listed on IDEAS
  3. William Shambora & Shamila Jayasuriya, 2008. "The world is shrinking: Evidence for stock market convergence," Economics Bulletin, AccessEcon, vol. 7(14), pages 1-12.
  4. Gazi Mainul Hassan & Hisham M. Al refai, 2012. "Can macroeconomic factors explain equity returns in the long run? The case of Jordan," Applied Financial Economics, Taylor & Francis Journals, vol. 22(13), pages 1029-1041, July.
  5. Ülkü, Numan & Baker, Saleh, 2014. "Country world betas: The link between the stock market beta and macroeconomic beta," Finance Research Letters, Elsevier, vol. 11(1), pages 36-46.

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