A Minskian Analysis of Financial Crisis in Developing Countries
AbstractThis paper provides a framework for examining developing-country financial crisis. It is based upon Hyman Minsky's financial fragility thesis and applied to the case of Thailand 1984-1999. There is empirical evidence for the evolution of the Thai economy through the Minskian regimes (hedged through speculative to Ponzi) in the period prior to the onset of the 1997 Asian crisis. Evidence also suggests that the Ponzi regime has two stages and that the rate of return on nonproductive speculative investment turns negative as the country entered the Ponzi regime. The diversion of foreign capital inflows to speculative investment played an important part in the deterioration of the Thai financial position. These results, if general, have strong implications for the field of country risk analysis, in particular, for the design of early warning models of financial crisis for developing countries.
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Bibliographic InfoPaper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. with number 2002-09.
Length: 45 pages
Date of creation: Aug 2002
Date of revision:
Asian crisis; country risk; developing countries; financial crisis; financial fragility; Minsky; Ponzi; Thailand;
Find related papers by JEL classification:
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
- D - Microeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-09-21 (All new papers)
- NEP-DEV-2002-09-21 (Development)
- NEP-FIN-2002-09-21 (Finance)
- NEP-IFN-2002-09-21 (International Finance)
- NEP-PKE-2002-09-21 (Post Keynesian Economics)
- NEP-RMG-2002-09-21 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer, vol. 6(4), pages 459-472, November.
- Morris Goldstein & Carmen M. Reinhart, 2000. "Assessing Financial Vulnerability: An Early Warning System for Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 100.
- Iancu, Aurel, 2011. "Models of Financial System Fragility," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 230-256, March.
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