Our sample period ends just before Brazil's devaluation. However, even if we
extend our sample period through late January 1999 (to capture the initial
sharp devaluation) or April 1999 (to include the first three months of a
more freely floating exchange rate in Brazil), this does not help any of the macroeconomic variables to become significant. The reason is that although
Brazil had current account and budget deficits in 1996, its final devaluation was
not large compared to other emerging market countries. Brazil experienced a 37%
devaluation from the end of 1996 through April 1999, which is about the same as
in Thailand and Malaysia and much less than in Indonesia or Russia (Table 3).
This is not enough to change the outcome for any macroeconomic variable in the
regression analysis. Interestingly, the lack of total collapse in Brazil, despite the
poor initial macroeconomic fundamentals, is very much in line with what could
have been predicted using the governance results from the next section.