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Expectations, the business cycle and the Mexican peso crisis

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  • Moritz Cruz
  • Edmund Amann
  • Bernard Walters

Abstract

The 1994--95 'peso' crisis did not display characteristics which allow it to be easily captured by traditional crisis models. Models based on Minsky's financial fragility hypothesis offer more persuasive accounts but have been supported by relatively little direct empirical evidence. This paper provides such evidence, with particular attention being paid to the role of domestic financial liberalisation in the process. Minsky's hypotheses about the evolution of expectations over the business cycle are tracked using business survey data. In addition, crisis indicators are constructed, reflecting the changing vulnerability of the economy to shocks. The findings support a Minskyian interpretation of the crisis. Copyright 2006, Oxford University Press.

Suggested Citation

  • Moritz Cruz & Edmund Amann & Bernard Walters, 2006. "Expectations, the business cycle and the Mexican peso crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(5), pages 701-722, September.
    • Handle: RePEc:oup:cambje:v:30:y:2006:i:5:p:701-722
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    File URL: http://hdl.handle.net/10.1093/cje/bei103
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    Citations

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    Cited by:

    1. Kohler, Karsten, 2019. "Exchange rate dynamics, balance sheet effects, and capital flows. A Minskyan model of emerging market boom-bust cycles," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 270-283.
    2. John Harvey, 2010. "Neoliberalism, Neoclassicism and Economic Welfare," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(2), pages 359-368.
    3. Beshenov, Sergey & Rozmainsky, Ivan, 2015. "Hyman Minsky's financial instability hypothesis and the Greek debt crisis," Russian Journal of Economics, Elsevier, vol. 1(4), pages 419-438.
    4. Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 665-681, September.

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