Mexico's balance-of-payments crisis: a chronicle of death foretold
AbstractThis paper claims that the roots of Mexico's balance-of-payments crisis are found in the prevailing high degree of capital mobility and financial globalization. Under these circumstances, shifts in foreign capital flows and anticipation of a banking-system bailout may produce large imbalances between stocks of financial assets and foreign reserves, threatening the sustainability of currency pegs. Econometric analysis suggests that 1/2 of Mexico's reserve losses could be accounted for by these phenomena. Large financial imbalances are also fertile ground for self-fulfilling-prophesy crises which lead devaluations to produce deep recessions. These difficulties can be partly remedied by appropriate policies.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 545.
Date of creation: 1996
Date of revision:
Other versions of this item:
- Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
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