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Crises financeiras nos anos 1990 e poupança externa [Financial crises of the 1990s and current account deficits]

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Author Info

  • Luiz Carlos Bresser-Pereira

    (FGV-SP)

  • Lauro Gonzalez

    (FGV-SP)

  • Cláudio Lucinda

    (FGV-SP)

Abstract

Contrary to what conventional economic analysis afirms, the main cause of the financial crises in emerging countries during the 1990s, beginning with Mexico (1994) and ending with the crisis in Argentina (2001) was not primarily fiscal, but the decision by governments to foster growth with foreign savings, i.e., with current account deficits. Since the exchange rate has other determinants besides domestic absorption, the assumption of twin deficits often does not hold. These were balance of payment crises triggered by an overvalued local currency and the high increases in the foreign debt and/or the fast growth of the current account deficit. This led, foreign creditors to suddenly become persuaded that the country faced both liquidity and solvency problems, and to stop rolling over the debt. An econometric test substantiates these claims.

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Bibliographic Info

Article provided by Economics Department, Universidade Federal de Minas Gerais (Brazil) in its journal Nova Economia.

Volume (Year): 18 (2008)
Issue (Month): 3 (September-December)
Pages: 327-357

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Handle: RePEc:nov:artigo:v:18:y:2008:i:3:p:327-357

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Related research

Keywords: financial crisis; balance of payment crises; current account deficits; exchange rate;

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References

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  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  2. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  3. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  4. Gabriel Palma, 2000. "The Magical Realism of Brazilian Economics: How to Create a Financial Crisis by Trying to Avoid One," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-16, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  5. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  6. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
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