A Brazilian-Type Debt Crisis

Assaf Razin and Efraim Sadka
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Efraim Sadka: International Monetary Fund

IMF Staff Papers, 2004, vol. 51, issue 1, 7

Abstract: This paper develops a model that captures important features of debt crises of the Brazilian type. Its applicability to Brazil lies in the facts that (1) macroeconomic fundamentals were relatively sound in the wake of the crisis (e.g., a nonnegligible primary surplus, a relatively low debt-GDP ratio, and low inflation); and (2) the trigger for the crisis - forthcoming elections with an expected regime change - appears to be extraneous. We rationalize the sort of circularity involved in a country's credit rating. In particular, we show how country credit ratings could bring about unstable macroeconomic behavior, and explore the implications of such behavior for fiscal policy. Copyright 2004, International Monetary Fund

JEL-codes: F21 F34 G15 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (5)

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