Risco-Brasil: The Lula Effect and the Central Bank Effects

Vol. 22 No. 3 (2002)

Jul-Sep / 2002
Published July 1, 2002
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Toledo, Joaquim Elói Cirne de. 2002. “Risco-Brasil: The Lula Effect and the Central Bank Effects”. Brazilian Journal of Political Economy 22 (3):524-32. https://doi.org/10.1590/0101-31572002-1362.

Risco-Brasil: The Lula Effect and the Central Bank Effects

Joaquim Elói Cirne de Toledo
Professor adjunto do Instituto de Economia da Universidade Federal do Rio de Janeiro – IE-UFRJ, Rio de Janeiro/RJ, Brasil.
Brazilian Journal of Political Economy, Vol. 22 No. 3 (2002), Jul-Sep / 2002, Pages 524-532


This short paper discusses the behavior of Brazil’s sovereign risk spread, since the adoption of a floating exchange rate regime in the beginning of 1999. The data presented seem to support the hypothesis of perverse effects of domestic monetary policy on countryrisk. On the other hand, fears of a future debt default — sparked by volatile presidential election polls — do not seem to explain a significant part of the risk spread, until very recently. The author is fully aware of the existence of a rich and fast-growing literature on country-risk. This paper is not an attempt to add new pieces of theory or rigorous analytical evidence to that literature; its sole aim is to make a small contribution to the debate, by pointing at some usually neglected factors that may explain Brazil’s sovereign risk spread. 

JEL Classification: E43.

Keywords: Brazil risk monetary policy public debt