Download Emerging Market Economies: economies in an earlier stage of

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project

Document related concepts

Financial economics wikipedia, lookup

History of the Federal Reserve System wikipedia, lookup

Present value wikipedia, lookup

Pensions crisis wikipedia, lookup

Interest rate ceiling wikipedia, lookup

Interest rate swap wikipedia, lookup

Interest rate wikipedia, lookup

Balance of payments wikipedia, lookup

Interbank lending market wikipedia, lookup

Global financial system wikipedia, lookup

Financialization wikipedia, lookup

Financial crisis wikipedia, lookup

1998–2002 Argentine great depression wikipedia, lookup

1997 Asian financial crisis wikipedia, lookup

Transcript
Emerging Market Economies: economies in an
earlier stage of market development that have
recently opened up to the flow of goods,
services, and capital from the rest of the world.
High growth rate, less restrictions
Mexican crisis in 1994
East Asian crisis in 1997-98
Argentine Crisis in 2001-02
•
•
Stage1: Initiation of Financial Crisis
Path1: Mismanagement of Financial
Liberalization/Globalization
1) Eliminating restrictions
Fixed Exchange Rate
Interest Rate increases
2) Weak Supervision
3) Moral hazard problems and adverse selection
4) Deterioration in bank’s balance sheets
Example: Mexico East Asia
Path 2: Severe Fiscal Imbalances
1) Government runs deficit
2) Banks are forced to purchase bonds
3) As bonds price declines, banks asset value
decreases.
4) Lending contraction
Example: Argentina
•
•
•
•
•
•
•
Other Factors
Interest Rate
Stock market decline
Uncertainty on political system
Stage 2: Currency Crisis
To hold fixed exchange rate, government needs
to hold large amount of foreign reserves.
Speculative attack: speculators engage in
massive sales of the domestic currency until it
collapses.
Government runs out of foreign reserves
Domestic currency depreciates
•
•
•
•
Example: East Asian Financial Crisis
Quantum Endowment Fund
Stage 3: Full-fledged Financial Crisis
Debts increases in terms of foreign currency
High Inflation Rate
Banks fail