An Investigation into the 1999 Collapse of the Brazilian Real

Omar Saqib ()

No 304, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This study argues that the political considerations were an important factor behind the crisis of the Brazilian real in January 1999. The divided coalition government and a president facing impending elections eschewed the correction of external misalignments and the fiscal austerity at a time when the markets were already excited by the 1997-98 East Asian and 1998 Russian financial crises. The hypothesis is established after confirming the vulnerability of Brazilian economy to currency crisis through Masson's model of multiple equilibrium and then it is tested by running a maximum likelihood logit regression.

Pages: 16 p.
Date: 2002
New Economics Papers: this item is included in nep-cba and nep-rmg
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Journal Article: An Investigation into the 1999 Collapse of the Brazilian Real (2003)
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