Recent Financial Crises

The macroeconomic crises can be divided into three different types: a) excess demand crises (section 8.1); b) regulatory inconsistency crises (section 8.2); c) systemic crises (sections 8.3 to 8.7). The excess demand crises are discussed with reference to Latin America in the early 1980s, when the currency crises were the unavoidable consequence of incompatibility between growth-oriented economic policies and fixed exchange-rate regimes (first-generation models). The regulatory inconsistency crisis is discussed with reference to the US S&L (Savings and Loan) debacle, in which the lack of experience of the banks and authorities, in a framework of pervasive deregulation, allowed the S&Ls to undertake excessive risks, eventually leading to a very expensive financial crisis for US citizens. As far as the systemic crises are concerned, a new phenomenon arose in the 1990s; with hindsight, it marked the beginning of the most acute and probably final phase of this political-economy cycle of finance. These crises of unprecedented severity, compared to the ones of previous decades, affected emerging countries: Mexico (in 1994), East Asia (in 1997–98), Russia (in 1998), Argentina and Turkey (in 2001). The systemic crises may be further divided into crises in the emerging economies and crises affecting the industrialized countries.