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An Investigation into the 1999 Collapse of the Brazilian Real

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  • Omar F. Saqib

Abstract

This study argues that the political considerations were an important factor behind the crisis of the Brazilian real in January 1999. The divided coalition government and a president facing impending elections eschewed the correction of external misalignments and the fiscal austerity at a time when the markets were already excited by the 1997-98 East Asian and 1998 Russian financial crises. The hypothesis is established after confirming the vulnerability of Brazilian economy to currency crisis through Masson's model of multiple equilibrium and then it is tested by running a maximum likelihood logit regression.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38558.de/dp304.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 304.

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Length: 16 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp304

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  1. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
  2. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
  3. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  4. Paul R. Masson, 1998. "Contagion," IMF Working Papers 98/142, International Monetary Fund.
  5. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
  6. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  7. van der Ploeg, Frederick, 1989. "The Political Economy of Overvaluation," Economic Journal, Royal Economic Society, vol. 99(397), pages 850-55, September.
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Cited by:
  1. Safdar Ullah Khan & Omar Farooq Saqib, 2007. "An Analysis of Pakistan s Vulnerability to Economic Crisis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 597-610.

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