The Russian Default and the Contagion to Brazil
IMF Working Papers, October 1, 2000
Source details
- Canonical URL
- The Russian Default and the Contagion to Brazil
Other formats
Bibliographic details
- Authors: Taimur Baig, Ilan Goldfajn
- Published: October 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857733.001
Summary
- 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.
- Evidence is consistent with 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, lending 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.
- 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.
Key findings and evidence
- Contagion mechanism:
- Foreign investor panic from the Russian crisis likely joined local speculative pressure against the Brazilian real.
- The off-shore Brady market is identified as the most likely transmission channel based on increased adjusted correlations during the crisis.
- Rejected hypotheses:
- No empirical support for a compensatory liquidation of assets by international institutional investors.
- No support for the timing being driven by a liquidity crisis in mature markets rather than the Russian crisis.
Publication and metadata
- Authors: Taimur Baig, Ilan Goldfajn
- Date: October 1, 2000
- Pages: 48
- Volume: 2000
- Issue: 160
- Series: Working Paper No. 2000/160
- DOI: https://doi.org/10.5089/9781451857733.001
- Stock No: WPIEA1602000
- ISBN: 9781451857733
- ISSN: 1018-5941
- Subjects: Balance of payments, Banking, Capital flows, Currency markets, Emerging and frontier financial markets, Financial crises, Financial markets, Stock markets
- Keywords: Asia and Pacific, Brady bond market, Brazil, Brazil regression, Capital flows, central bank of Brazil, Contagion, Currency markets, Emerging and frontier financial markets, Exchange Rate, market, market investor, Off-shore Markets, Russia, stock index, Stock markets, U.S. dollar, WP
IMF Working Papers — The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
Content in this bundle
- The Russian Default and the Contagion to Brazil - WP/00/160