Does rule-based import-parity fuel pricing stabilize exchange rates in commodity-dependent economies? We exploit Brazil's October 2016 transition from administered fuel pricing to import-parity pricing (PPI) as a discrete policy regime change to identify the effects of pricing rules on exchange rates and sovereign risk. The central finding is a sign reversal in the fuel-CDS relationship across regimes. Under administered pricing, higher oil prices reduce sovereign spreads through a commodity-windfall channel. Under PPI, the same shock widens spreads, reflecting a reallocation of oil-price risk from the sovereign balance sheet to consumers and firms. Local projection estimates show that cumulative responses of exchange rates and CDS spreads to fuel-price shocks are 40--60% smaller under PPI. A battery of robustness tests, including placebo windows, pre-trend diagnostics, structural break tests, and comparative specifications exploiting fuel versus nonfuel commodity prices, indicates that the stabilization reflects the pricing-regime change rather than broader macroeconomic conditions.
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