The Russian Default and the Contagion to Brazil

By Taimur Baig, I. Goldfajn. Social Science Research Network, 2000

183 citations recorded by the source corpus.

In the aftermath of the Russian crisis in August 1998, a series of events led to the Brazilian crisis that culminated in the floating of the real in January 1999. The timing of the events led academics and policy makers to suspect that there was contagion from the Russian crisis to Brazil. If true, the transmission of pressure from Russia to Brazil would be a special case among the financial crises episodes seen in the 1990s. In contrast to the Mexican (1994) and Thai (1997) crises, the Russian contagion to Brazil appears to have crossed regional borders, thus leading to a number of interesting questions. Given the lack of substantial trade and direct financial linkages, why did the Russian devaluation prompt capital flight from Brazil? Why did some countries with similar fundamentals and stronger economic links not have a crisis (as for example Hungary)? In this paper, we attempt to verify the contagion presumption, and to analyze related issues that can aid our understanding of financial crises and contagion.

Subfields: Economics and Econometrics, Finance, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/01f8212d00d7925cdfaf5e60240febd97f21f1fc

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Citations in the corpus

How Does U.S. Monetary Policy Influence Sovereign Spreads in Emerging Markets? (2001, background): “Baig and Goldfajn (2001) have analyzed the contagion from Russia to Brazil during 1998, while Edwards and Susmel (2000) have explored how changes in financial volatility, particularly interest rate volatility, have affected countries that supposedly have experienced market turbulence or contagion.”
Spillovers through banking centers: a panel data analysis of bank flows (2003, background): “The paper by Baig and Goldfajn (2001) concludes that banks were probably not a main channel for contagion to Brazil after the Russian crisis; this conclusion rests on the finding that the main common lender—Germany—maintained a relatively high rollover rate (70%) after the Russian crisis.”
Default risk and risk averse international investors (2013, background): “From Equation (19) is clear that if investors are risk averse, q(b′, s) depends not only on the emerging economy’s fundamentals (i.e. y and b′), but on γL and W .”