Book contents
- Frontmatter
- Contents
- Acknowledgements
- List of Contributors
- 1 Introduction
- 2 How Financial Liberalization Led in the 1990s to Three Different Cycles of ‘Manias, Panics and Crashes’ in Middle-Income Countries
- 3 Timing the Mexican 1994–95 Financial Crisis using a Markov Switching Approach
- 4 Exchange Rates, Growth and Inflation: What If the Income Elasticities of Trade Flows Respond to Relative Prices?
- 5 Alternative Measures of Currency and Asset Substitution: The Case of Turkey
- 6 Competitive Diversification in Resource Abundant Countries: Argentina after the Collapse of the Convertibility Regime
- 7 Foreign Portfolio Investment, Stock Market and Economic Development: A Case Study in India
- 8 Transnational Corporations and the Internationalization of Research and Development Activities in Developing Countries: The Relative Importance of Affiliates in Asia and Latin America
- 9 External Debt Nationalization as a Major Tendency on Brazilian External Debt in the Twentieth Century: The Shifting Character of the State during Debt Crisis
- 10 Prudential Regulation and Safety Net: Recent Transformations in Brazil
- 11 Re-crafting Bilateral Investment Treaties in a Development Framework: A Comparative Regional Perspective
2 - How Financial Liberalization Led in the 1990s to Three Different Cycles of ‘Manias, Panics and Crashes’ in Middle-Income Countries
Published online by Cambridge University Press: 05 March 2012
- Frontmatter
- Contents
- Acknowledgements
- List of Contributors
- 1 Introduction
- 2 How Financial Liberalization Led in the 1990s to Three Different Cycles of ‘Manias, Panics and Crashes’ in Middle-Income Countries
- 3 Timing the Mexican 1994–95 Financial Crisis using a Markov Switching Approach
- 4 Exchange Rates, Growth and Inflation: What If the Income Elasticities of Trade Flows Respond to Relative Prices?
- 5 Alternative Measures of Currency and Asset Substitution: The Case of Turkey
- 6 Competitive Diversification in Resource Abundant Countries: Argentina after the Collapse of the Convertibility Regime
- 7 Foreign Portfolio Investment, Stock Market and Economic Development: A Case Study in India
- 8 Transnational Corporations and the Internationalization of Research and Development Activities in Developing Countries: The Relative Importance of Affiliates in Asia and Latin America
- 9 External Debt Nationalization as a Major Tendency on Brazilian External Debt in the Twentieth Century: The Shifting Character of the State during Debt Crisis
- 10 Prudential Regulation and Safety Net: Recent Transformations in Brazil
- 11 Re-crafting Bilateral Investment Treaties in a Development Framework: A Comparative Regional Perspective
Summary
‘I can [understand and] calculate the motions of the heavenly bodies, but not the madness of [the South Sea Bubble] people.’
Isaac NewtonIntroduction
Four major financial crises have struck middle-income developing countries (DCs) since the 1982 debt-crisis: Mexico in 1994 (and the subsequent ‘Tequila-effect’ in Argentina); East and Southeast Asia in 1997; Brazil in 1999; and Argentina in 2001.
Two common characteristics of the these crises are that the countries involved had recently open up their capital accounts, and that they had done so at a time of high liquidity in international financial markets and slow growth in most OECD economies – i.e., at a time when an over-liquid, highly volatile and under-regulated international financial market was anxiously seeking new high-yield investment opportunities.
The first part of this paper will attempt to show that no matter how diversely these financially liberalised DCs tried to deal with the absorption problem created by sudden surges in capital inflows, they inevitably ended up in financial crisis via a Kindlebergian cycle of ‘mania, panic and crash’. However, there is a clear distinction between the Latin American and the East Asian crisis-building pattern; furthermore, within Latin America there is a further distinction between Brazil (where there was a major policy attempt to avoid the Kindlebergian cycle via an aggressive sterilisation of inflows) and the other crises countries of the region.
- Type
- Chapter
- Information
- Capital Without BordersChallenges to Development, pp. 11 - 38Publisher: Anthem PressPrint publication year: 2010