Publications

"Vanishing Financial Contagion?”, joint with P. Mauro and S. Schmukler.
Journal of Policy Modeling, forthcoming. Also, IMF Policy Discussion Paper 06/01, 2006.
Featured in the Dow Jones Newswires (January 25, 2006); Clarin (Argentina) (January 27, 2006).

Abstract: While a number of emerging market crises were characterized by widespread contagion during the 1990s, more recent crises (notably in Argentina) have been mostly contained within national borders. This has led some observers to wonder whether contagion might have become a feature of the past, with markets now better discriminating between countries with good and bad fundamentals. This paper argues that a prudent working assumption is that contagion has not vanished permanently. Available data do not seem to point to a disappearance of the main channels that contribute to the transmission of crises across countries. Moreover, anticipation of the Argentine crisis by international investors may help explain the recent absence of contagion.

“Very High Interest Rates and the Cousin Risks: Brazil during the Real Plan,” in Jose Gonzalez and Anne Krueger, eds., Latin American Macroeconomic Reforms: The Second Stage, The University of Chicago Press. Reprinted as “Taxa de Juros, Risco Cambial, e Risco Brasil” in Politica e Planejamento Economico 33 (2), pp.253-97, August 2003. (Joint with M. Garcia.)
Presented at the Stanford Center for International Development’s Latin America Conference on Macroeconomic Policy Reform, Stanford, 2000, at the LACEA 2001 Annual Meetings, Montevideo, Uruguay, and at the XXIX Encontro Nacional de Economia, Salvador, Brazil, 2001.

Abstract: This paper computes and estimates two risks that keep Brazilian interest rates extremely high: the currency and country risks. The country risk is directly measured from fixed income instruments and derivatives, while the currency risk is estimated via a Kalman Filter. The paper also identifies a few important components of these risks, e.g. the convertibility risk. Preliminary results indicate that high domestic interest rates are associated with conditions in international financial markets and uncertainty concerning the current account sustainability. Therefore, export growth is important to achieve lower real interest rates.