Financial Crises in
“Successful” Emerging
Economies

Financial Crises in
“Successful” Emerging
Economies

Financial Crises in
“Successful” Emerging
Economies

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The Globalization of
Financial Volatility:
Challenges for Emerging
Economies
ne of the outstanding features of modern financial
crises is that they occurred in emerging economies
that were generally viewed as very successful until the crises exploded.
Moreover, recent crises have been radically different from those typical
from the 1940s to the 1970s, which, in Latin America, displayed three
major features that have been absent or relatively less important in recent
experiences. First, past crises involved large fiscal deficits that were financed
with external loans or,
in the absence of such financing, by central
banks.
Second,
domestic financial systems were
repressed,
a fact that was
generally
accompanied by
private
sector access to rediscount
or bank loans
at
negative real
interest
rates. Finally,
balance of payments crises were
frequently
associated with a sharp worsening in the terms of trade or explicit
domestic
policy decisions to overvalue
exchange
rates.

Ricardo Ffrench-Davis