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Country risk endogeneity, capital flows and capital controls in Brazil

Author

Listed:
  • Flávio Vieira

    (Professor of Economics, Universidade Federal de Uberlândia -UFU, Uberlândia/MG, Brasil.)

  • Márcio Holland

    (Professor of Economics, Universidade Federal de Uberlândia – UFU, Uberlândia/MG, Brasil; CNPq Researcher.)

Abstract

The main goal of the paper is to analyze the relationship between capital flows, country risk, capital controls and interest rate differential in Brazil since the mid of 90s. We know how controversial is the role and the effectiveness of capital controls during episodes of crises, and how emerging countries can be trapped in a vicious circle expressed through the behavior of two crucial variables: the country risk and the interest rate. Empirical results suggest that interest rate differential is endogenous to country risk, mainly explained when we consider the existence of a probability of default in the context of a high public debt. JEL Classification: F30; E43; E44.

Suggested Citation

  • Flávio Vieira & Márcio Holland, 2003. "Country risk endogeneity, capital flows and capital controls in Brazil," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(1), pages 12-38, January.
    • Handle: RePEc:ekm:repojs:v:23:y:2003:i:1:id:95804
    DOI: 10.1590/0101-31572003-0703
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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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