Financial Crises, 1929 to the Present

Financial Crises, 1929 to the Present

Sara Hsu

This fascinating volume offers a comprehensive synthesis of the events, causes and outcomes of the major financial crises from 1929 to the present day. Beginning with an overview of the global financial system, Sara Hsu presents both theoretical and empirical evidence to explain the roots of financial crises in general. She then provides a thorough breakdown of a number of major crises of the past century, both in the United States and around the world.

Chapter 6: Mid 1990s: Mexican crisis and Asian financial crisis

Sara Hsu

Subjects: economics and finance, economic psychology, financial economics and regulation

Extract

Starting in the mid-nineties, financial crises worsened. With the continuing trend of liberalization, countries opened themselves up to volatile capital flows. Prevailing wisdom found that liberalization was the path to growth. Mexico, which had suffered like other Latin American countries in the eighties from the debt crisis and its accompanying slow growth, was eager to regain its foothold in development. What was not well understood at the time was that liberalization could create dangerous instability. The newly industrializing economies in Asia also followed the path of liberalization. At the time, it seemed to work miracles; economic growth was as high as 11 percent in the early nineties in Singapore and Thailand. But growth did not last, and capital flows rapidly switched course and fled the Asian nations. The capital outflows caused both currency and banking crises, and threatened to spread to other countries. Both crises threatened global financial stability. For this reason, the IMF became the global lender of last resort, embarking on a controversial role that it would play on the world stage. At the time, its wisdom was accepted. We next examine the historical context of these two crises and describe how events unfolded.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information