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A Brazilian-Type Debt Crisis

Author

Listed:
  • Assaf Razin

    (International Monetary Fund)

  • Efraim Sadka

    (International Monetary Fund)

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

Suggested Citation

  • Assaf Razin & Efraim Sadka, 2004. "A Brazilian-Type Debt Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1-7.
    • Handle: RePEc:pal:imfstp:v:51:y:2004:i:1:p:7
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    Citations

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    Cited by:

    1. Hutchison, Michael M. & Noy, Ilan & Wang, Lidan, 2010. "Fiscal and monetary policies and the cost of sudden stops," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 973-987, October.
    2. William C. Gruben & John H. Welch, 2010. "Is Tighter Fiscal Policy Expansionary Under Fiscal Dominance?: Hypercrowding Out In Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 171-181, April.
    3. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series 324, Central Bank of Brazil, Research Department.
    4. Philipp Paulus, 2006. "Brüssel, Frankfurt oder Basel - Wo muss das Problem steigender Staatsschulden in der Europäischen Währungsunion gelöst werden?," Otto-Wolff-Institut Discussion Paper Series 01/2006, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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