Book contents
- Frontmatter
- Contents
- Preface
- PART 1 OVERVIEW
- PART 2 A BENCHMARK MACROECONOMIC MODEL FOR AN EMERGING ECONOMY
- PART 3 PUBLIC FINANCE AND MACROECONOMIC PERFORMANCE
- PART 4 THE FINANCIAL SECTOR AND MACROECONOMIC PERFORMANCE
- PART 5 EXCHANGE RATE MANAGEMENT
- 16 Equilibrium Real Exchange Rates
- 17 Exchange Rate Regimes
- 18 Managing an Officially Determined Exchange Rate
- 19 Banking Crises and Exchange Rate Crises in Emerging Economies
- 20 Domestic Macroeconomic Management in Emerging Economies: Lessons from the Crises of the Nineties
- References
- Index
19 - Banking Crises and Exchange Rate Crises in Emerging Economies
Published online by Cambridge University Press: 04 December 2009
- Frontmatter
- Contents
- Preface
- PART 1 OVERVIEW
- PART 2 A BENCHMARK MACROECONOMIC MODEL FOR AN EMERGING ECONOMY
- PART 3 PUBLIC FINANCE AND MACROECONOMIC PERFORMANCE
- PART 4 THE FINANCIAL SECTOR AND MACROECONOMIC PERFORMANCE
- PART 5 EXCHANGE RATE MANAGEMENT
- 16 Equilibrium Real Exchange Rates
- 17 Exchange Rate Regimes
- 18 Managing an Officially Determined Exchange Rate
- 19 Banking Crises and Exchange Rate Crises in Emerging Economies
- 20 Domestic Macroeconomic Management in Emerging Economies: Lessons from the Crises of the Nineties
- References
- Index
Summary
This chapter attempts to bring together much of the material covered in the rest of the book by analyzing the links between exchange rate crises and banking crises in developing countries both analytically as well as by conducting case studies of the 1994 Mexican and 1997 Asian crises. These recent crises are contrasted with the fiscally driven international debt crisis of the 1980s that we discussed in Chapter 8, and are compared to the 1982 Chilean financial crisis, which has been mentioned at various places earlier in the book. The objective of this chapter is to illustrate how the three general topics treated in this book – fiscal management, management of the financial system, and exchange rate management – lie at the heart of the most severe macroeconomic crises that developing countries have faced over the past two decades.
MACROECONOMIC POLICIES AND VULNERABILITY: THEORY
In Chapter 15, we discussed the “capital inflow problem” created by the capital account openness that accompanied financial reform in emerging economies. One reason that capital inflows were perceived as a problem was the possibility of capital-flow reversals. That is, the arrival of capital inflows was a symptom of an enhanced degree of financial integration that left countries vulnerable to capital-flow reversals and to the financial (banking and currency) crises that would accompany them.
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- Macroeconomics in Emerging Markets , pp. 376 - 404Publisher: Cambridge University PressPrint publication year: 2003