Contagion effect in Latin America big three

Holanda, Marcos C.; Corrêa, Márcio V.

doi:10.1590/S0101-41612003000300004

Abstracts

The article investigates the occurrence of contagion among the three main economies of Latin America during the second half of the 90's. The investigation is based on the Brady Bonds market for Brazil, Mexico and Argentina. Three methodologies are applied to quantify the contagion effect: correlation of Brady Bonds price, analyses of residuals of estimated regressions and signal extraction analyses through the Kalman filter.

contagion; financial crisis; Kalman filter

O artigo estuda a ocorrência de contágio entre as três principais economias da América Latina na segunda metade dos anos 90. O estudo baseia-se na análise do mercado de Brady Bonds do Brasil, México e Argentina. Três metodologias são aplicadas para medir o efeito contágio: correlação dos preços dos Bradies, análise do comportamento dos resíduos de regressões estimadas e extração de sinal a partir do filtro de Kalman.

contágio; crises financeiras; filtro de Kalman

Contagion effect in Latin America big three

Marcos C. Holanda^I; Márcio V. Corrêa^II

^IGraduate School of Economics - CAEN, Federal University of Ceará, Brazil

^IIPh.D. Student at the Universidade Nova Lisboa, Portugal

ABSTRACT

The article investigates the occurrence of contagion among the three main economies of Latin America during the second half of the 90's. The investigation is based on the Brady Bonds market for Brazil, Mexico and Argentina. Three methodologies are applied to quantify the contagion effect: correlation of Brady Bonds price, analyses of residuals of estimated regressions and signal extraction analyses through the Kalman filter.

Key words: contagion, financial crisis, Kalman filter

JEL Classification

F34, C22

RESUMO

O artigo estuda a ocorrência de contágio entre as três principais economias da América Latina na segunda metade dos anos 90. O estudo baseia-se na análise do mercado de Brady Bonds do Brasil, México e Argentina. Três metodologias são aplicadas para medir o efeito contágio: correlação dos preços dos Bradies, análise do comportamento dos resíduos de regressões estimadas e extração de sinal a partir do filtro de Kalman.

Palavras-chave: contágio, crises financeiras, filtro de Kalman.

Full text available only in PDF format.

Texto completo disponível apenas em PDF.

(Recebido em setembro de 2002. Aceito para publicação em junho de 2003).

E-mail: holanda@ufc.br

I am grateful to CNPq - Brazil for financial support.

AIZENMAN, Joshua. Country risk, incomplete information and taxes on international borrowing. The Economic Journal, 99, p. 147-161, 1989.
BAIG, T.; GOLDFAJN, I. The Russian default and the contagion to Brazil. IMF Working Paper, 2000.
BANCO CENTRAL DA ARGENTINA. Disponível em: http://www.bcra.gov.ar
» link
BANCO CENTRAL DO BRASIL. Disponível em: http://www.bcb.gov.br
» link
BANCO CENTRAL DO MÉXICO. Disponível em: http://www.banxico.org.mx
» link
BAPTISTA, Jolanda Eline Ygosse. Empirical study on LDC sovereign debt and government's credibility Ph.D. (Tesis), Tinbergen Institute, Netherlands. Amsterdam.
CALVO, Guillermo A.; MENDOZA, Enrique G. Rational contagion and the globalization os securities markets. Journal of International Economics, 51, p. 79-113, 1998.
CALVO, S.; REINHART, C. Capital flows to Latin America: is there evidence of contagion effect? Washington, D.C.: Institute for International Economics, 1996.
CLAUDE, B. Erb; CAMPBELL, R. Harvey; TADAS, E. Viskantas. Political risk, economic risk, and financial risk. Financial Analysts Journal, v. 52, n. 6, p. 28-46, Nov/Dec. 1996.
COUNTRY REVIEW. 2001. Disponível em: http://www.country watch.com
DORNBUSCH, R.; PARK, Y. C.; CLAESSENS, S. Contagion: how it spreads and how it can be stopped. World Bank Working Paper, 2000.
EDWARDS, Sebastian. LDC foreign borrowing and default risk: an empirical investigation, 1976-80. The American Economic Review, v. 74, n. 4, 1984.
_______. Interest rate volatility, capital controls and contagion. NBER Working Paper 6756, 1998.
ELTON, Edwin J.; GRUBER, Martin J.; BLAKE, Christopher R. Fundamental economic variables, expected returns, and bond fund performance. The Journal of Finance, v. L, n. 4, 1995.
FORBES, Kristin; RIGOBON, Roberto. Contagion in Latin America: definitions, measurement and policy implications. NBER Working Paper 7885, 1998.
FROOT, Kenneth A.; O´CONNELL, Paul G. J.; SEASHOLES, Mark S. The portfolio flows of international investors. World Bank Working Paper, 1999.
FULLER, Wayne A. Introduction to statistical time series 2ª ed. Wiley Series in Probability and Statistics, 1996.
GOLDFAJN, Ilan; BAIG, T. Financial market contagion in the Asian crisis Departamento de Economia - PUC/RJ, Textos para Discussão, n. 400, 1998.
HAMILTON, James D. Uncovering financial market expectations of inflation. Journal of Political Economy, 93, p. 1224-1241, 1985.
IBGE. Disponível em: http://www.ibge.gov.br/ibge
» link
INDEC-Ar. Instituto Nacional de Estatísticas e Censos da Argentina. Disponível em: http://www.indec.gov.ar
» link
IPEA - Instituto de Pesquisas Econômica Aplicada. Disponível em: http://www.ipeadata.gov.br
» link
IZVORSKI, Igor. Brady bonds and default probabilities. IMF Working Papers, 98/16.
KAMINSKY, Graciela L.; REINHART, Carmen M. On crises, contagion, and confusion. Journal of International Economics, 51, p. 145-168, 1999.
_______. On crises, contagion and confusion. World Bank Working Paper, 1998.
MINISTÉRIO DA ECONOMIA DA ARGENTINA. Disponível em: http://www.mecon.gov.ar
» link
MINISTÉRIO DA FAZENDA DO BRASIL. Disponível em: http://www.fazenda.gov.br
» link
MORAIS, Igor C.; PORTUGAL, Marcelo S. Características da volatilidade estocástica dos par bonds da América Latina UFRGS, 1999.
_______. Modelagem e previsão de volatilidade determinística e estocástica para a série do Ibovespa. Estudos Econômicos, v. 29, n. 3, p. 303-341, jul/set. 1999.
PARK, Y. C.; SONG, C. Y. Financial contagion in the East Asian crises - with special reference to the Republic of Korea. World Bank Working Paper, 1999.
PORTUGAL, Marcelo S. Modelos de previsão de séries de tempo III Curso de Atualização em Economia, ANPEC, 1996.
VALDES, Rodrigo. Emerging markets contagion: evidence and theory. World Bank Working Paper, 1997.
WELCH, Greg; BISHOP, Gary. An introduction to the Kalman filter. Disponível em: http://www.cs.unc.edu/~welch/media/pdf/kalman_intro.pdf 2001.

Publication Dates

Publication in this collection
16 Oct 2009
Date of issue
Sept 2003

History

Accepted
June 2003
Received
Sept 2002

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

[1] AIZENMAN, Joshua. Country risk, incomplete information and taxes on international borrowing. The Economic Journal, 99, p. 147-161, 1989.

[2] BAIG, T.; GOLDFAJN, I. The Russian default and the contagion to Brazil. IMF Working Paper, 2000.

[3] BANCO CENTRAL DA ARGENTINA. Disponível em: http://www.bcra.gov.ar
» link

[4] BANCO CENTRAL DO BRASIL. Disponível em: http://www.bcb.gov.br
» link

[5] BANCO CENTRAL DO MÉXICO. Disponível em: http://www.banxico.org.mx
» link

[6] BAPTISTA, Jolanda Eline Ygosse. Empirical study on LDC sovereign debt and government's credibility Ph.D. (Tesis), Tinbergen Institute, Netherlands. Amsterdam.

[7] CALVO, Guillermo A.; MENDOZA, Enrique G. Rational contagion and the globalization os securities markets. Journal of International Economics, 51, p. 79-113, 1998.

[8] CALVO, S.; REINHART, C. Capital flows to Latin America: is there evidence of contagion effect? Washington, D.C.: Institute for International Economics, 1996.

[9] CLAUDE, B. Erb; CAMPBELL, R. Harvey; TADAS, E. Viskantas. Political risk, economic risk, and financial risk. Financial Analysts Journal, v. 52, n. 6, p. 28-46, Nov/Dec. 1996.

[10] COUNTRY REVIEW. 2001. Disponível em: http://www.country watch.com

[11] DORNBUSCH, R.; PARK, Y. C.; CLAESSENS, S. Contagion: how it spreads and how it can be stopped. World Bank Working Paper, 2000.

[12] EDWARDS, Sebastian. LDC foreign borrowing and default risk: an empirical investigation, 1976-80. The American Economic Review, v. 74, n. 4, 1984.

[13] _______. Interest rate volatility, capital controls and contagion. NBER Working Paper 6756, 1998.

[14] ELTON, Edwin J.; GRUBER, Martin J.; BLAKE, Christopher R. Fundamental economic variables, expected returns, and bond fund performance. The Journal of Finance, v. L, n. 4, 1995.

[15] FORBES, Kristin; RIGOBON, Roberto. Contagion in Latin America: definitions, measurement and policy implications. NBER Working Paper 7885, 1998.

[16] FROOT, Kenneth A.; O´CONNELL, Paul G. J.; SEASHOLES, Mark S. The portfolio flows of international investors. World Bank Working Paper, 1999.

[17] FULLER, Wayne A. Introduction to statistical time series 2ª ed. Wiley Series in Probability and Statistics, 1996.

[18] GOLDFAJN, Ilan; BAIG, T. Financial market contagion in the Asian crisis Departamento de Economia - PUC/RJ, Textos para Discussão, n. 400, 1998.

[19] HAMILTON, James D. Uncovering financial market expectations of inflation. Journal of Political Economy, 93, p. 1224-1241, 1985.

[20] IBGE. Disponível em: http://www.ibge.gov.br/ibge
» link

[21] INDEC-Ar. Instituto Nacional de Estatísticas e Censos da Argentina. Disponível em: http://www.indec.gov.ar
» link

[22] IPEA - Instituto de Pesquisas Econômica Aplicada. Disponível em: http://www.ipeadata.gov.br
» link

[23] IZVORSKI, Igor. Brady bonds and default probabilities. IMF Working Papers, 98/16.

[24] KAMINSKY, Graciela L.; REINHART, Carmen M. On crises, contagion, and confusion. Journal of International Economics, 51, p. 145-168, 1999.

[25] _______. On crises, contagion and confusion. World Bank Working Paper, 1998.

[26] MINISTÉRIO DA ECONOMIA DA ARGENTINA. Disponível em: http://www.mecon.gov.ar
» link

[27] MINISTÉRIO DA FAZENDA DO BRASIL. Disponível em: http://www.fazenda.gov.br
» link

[28] MORAIS, Igor C.; PORTUGAL, Marcelo S. Características da volatilidade estocástica dos par bonds da América Latina UFRGS, 1999.

[29] _______. Modelagem e previsão de volatilidade determinística e estocástica para a série do Ibovespa. Estudos Econômicos, v. 29, n. 3, p. 303-341, jul/set. 1999.

[30] PARK, Y. C.; SONG, C. Y. Financial contagion in the East Asian crises - with special reference to the Republic of Korea. World Bank Working Paper, 1999.

[31] PORTUGAL, Marcelo S. Modelos de previsão de séries de tempo III Curso de Atualização em Economia, ANPEC, 1996.

[32] VALDES, Rodrigo. Emerging markets contagion: evidence and theory. World Bank Working Paper, 1997.

[33] WELCH, Greg; BISHOP, Gary. An introduction to the Kalman filter. Disponível em: http://www.cs.unc.edu/~welch/media/pdf/kalman_intro.pdf 2001.