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The Russian Default and the Contagion to Brazil

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  • Taimur Baig
  • Ilan Goldfajn
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    Abstract

    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/160.

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    Length: 48
    Date of creation: 01 Oct 2000
    Date of revision:
    Handle: RePEc:imf:imfwpa:00/160

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    Related research

    Keywords: Exchange rates; Offshore financial centers; stock market; capital flows; bonds; brady bonds; financial markets; eurobonds; stock index; bond; capital markets; international capital markets; capital inflows; liquidity crisis; net capital flows; mature markets; international capital; private capital; net capital; access to international capital; eurobond; short-term capital; bond markets; equity securities; financial market; inflation rate; capital account transactions; private capital flows; international banks; capital goods; stock market indices; brady bond; capital inflow; private capital inflows; official flows; currency crises; access to international capital markets; oil futures; investor confidence; capital flow; spot market; international interest rates; credit rating; devaluation of currencies; sovereign bonds; global bonds; financial institutions; bond spreads; excess demand; treasury bonds; debt securities; domestic financial markets; international reserves; stock market movements; currency regime; commodity prices; equity market; international bond; capital controls; equity markets; portfolio investment; debt stocks; stock indices; gross domestic product; international finance; domestic interest rates; federal bonds;

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