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A Minskian Analysis of Financial Crisis in Developing Countries

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Author Info
Susan K. Schroeder (New School University and University of Bremen)
Abstract

This 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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Paper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA Working Papers with number 2002-09.

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Length: 45 pages
Date of creation: Aug 2002
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Handle: RePEc:epa:cepawp:2002-09

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Related research
Keywords: 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

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References listed on IDEAS
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.:
  1. Anwar M. Shaikh, 1998. "The Stock Market and the Corporate Sector: A Profit-Based Approach," Macroeconomics 9811007, EconWPA. [Downloadable!]
  2. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer, vol. 6(4), pages 459-472, November. [Downloadable!] (restricted)
  3. Philip Arestis, 2002. "Financial crisis in Southeast Asia: dispelling illusion the Minskyan way," Cambridge Journal of Economics, Oxford University Press, vol. 26(2), pages 237-260, March.
  4. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany. [Downloadable!]
  5. J.A. Kregel, 1998. "Yes, "It" Did Happen Again - A Minsky Crisis Happened in Asia," Macroeconomics 9805017, EconWPA. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Agustinus, Prasetyantoko & Luhur, Fajar-Marta, 2008. "Indonesia’s Ponzi Economy: Does Financial Crisis Give a Lesson," MPRA Paper 6776, University Library of Munich, Germany. [Downloadable!]
  2. Moritz Cruz, 2005. "The business cycle in a financially deregulated context: Theory and evidence," International Review of Applied Economics, Taylor and Francis Journals, vol. 19(3), pages 271-287, July. [Downloadable!] (restricted)
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