Severe international debt crises have become a defining feature of the contemporary world economy. In the 1980s and 1990s, severe international debt and currency crises occurred in developing economies; the most severe were the 1982 Latin American debt crisis and the 1997 East Asian financial crisis. The most severe crises of the 2000s – the 2007–08 subprime crisis and the 2010 European crisis – marked a step-change, as international debt crisis moved from the periphery of the global financial system to its core, and shook the global financial system to its foundations. This chapter reviews this history and explores economists’ explanations of both why they occur and what should be done about them.
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