Political Assassination and its Impact on Emerging Markets’ Financial Assets Available to Purchase

This paper examines the impact of the assassination of Mexico’s leading presidential candidate on Mexican Brady bonds and its spillover effects to other emerging financial markets. On the day of the assassination, Mexican Brady bonds declined by a significant 0.97 percent and continued to experience significant declines over the following three trading sessions. However, with the naming of Ernesto Zedillo as the ruling party’s presidential candidate, Mexican Brady bonds recovered over 75 percent of the losses incurred during the previous four trading days. The assassination did not significantly affect other emerging financial markets. The availability of a $6 billion swap facility, holding of large foreign reserves, selection of Ernesto Zedillo, and well managed responses by the Mexican government all served to attenuate spillover effects from the Mexican political crisis.