1 “ Learning to Forget ? Contagion and Political Risk in Brazil ”

  title={1 “ Learning to Forget ? Contagion and Political Risk in Brazil ”},
  author={Marcus Miller and Kannika Thampanishvong and Lei Zhang},
We examine whether Brazilian sovereign spreads of over 20 percent in 2002 could be due to contagion from Argentina or to domestic politics, or both. Treating unilateral debt restructuring as a policy variable gives rise to the possibility of self-fulfilling crisis, which can be triggered by contagion. We explore an alternative political-economy explanation of panic in financial markets inspired by Alesina (1987), which stresses exaggerated market fears of an untried Left-wing candidate. To… CONTINUE READING

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