The Mexican Financial Crisis in 1994 and the Asian Crisis 1997 - Causes and Effects

Seminar paper from the year 2006 in the subject Economics - Case Scenarios, grade: HD, La Salle University, 11 entries in the bibliography, language: English, abstract: Introduction The present work deals with the macroeconomic consequences of capital imports in open national economies. There are quite a lot of similarities when comparing the Mexican financial crisis in late 1994 and the Asian financial crisis between 1997 and 1998. In both cases the failure of monetary and fiscal policy and the fact that we are living in a world where capital is highly mobile were the main reasons which led to the crisis. By comparing the two crisis and their grounds we realize how helpless and vulnerable emerging countries are when it comes to sudden capital outflows. Equally, the problems occurred in Mexico and the Asian economies surprised many experts. Institutions, like the International Monetary Fund, lauded and praised these economies as new models which should be followed by other countries. This paper is structured as follows: In Chapter 1, a brief overview is given on both economies, especially their macroeconomic environments before the crisis. To understand the main reasons of the crisis it is necessary to be familiar with the situation in both economies. Chapter 2 deals with the reason and circumstances that causes the outbreak in the end. Here I am focusing on each economy individually. In Chapter 3 both cases are compared, concentrating on four major aspects. Moreover I want to emphasize on the lessons for the future and how emerging market can avoid financial crisis by becoming less vulnerable against the power of international capital markets.

Dettagli