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The Balance Sheet Approach to Financial Crises in Emerging Markets

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  • Jan Toporowski
  • Giovanni Cozzi
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    Abstract

    This paper contrasts the conventional balance sheet approach to the analysis of economic disturbances in emerging markets with the alternative balance sheet approach that applies and extends Minsky's Financial Instability Hypothesis to (open) emerging market economies. Earlier balance sheet studies are found to be flawed because of a failure to disaggregate firms' balance sheets. Examination of such balance sheets in Thailand, Malaysia, Indonesia, Singapore, and Hong Kong suggests that firms in the three crisis countries did share common causes of financial fragility, but that the level of financial development and the particular domestic economic and political situation also affected their situation.

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    Bibliographic Info

    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_485.

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    Date of creation: Dec 2006
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    Handle: RePEc:lev:wrkpap:wp_485

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    References

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    1. Jan Toporowski, 2006. "Methodology and Microeconomics in the Early Work of Hyman P. Minsky," Economics Working Paper Archive wp_480, Levy Economics Institute.
    2. Palma, Gabriel, 1998. "Three and a Half Cycles of 'Mania, Panic, and [Asymmetric] Crash': East Asia and Latin America Compared," Cambridge Journal of Economics, Oxford University Press, vol. 22(6), pages 789-808, November.
    3. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    4. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
      • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
    5. Mishkin, Frederic S., 2001. "Financial policies and the prevention of financial crises in emerging market economies," Policy Research Working Paper Series 2683, The World Bank.
    6. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
    7. Jan A. Kregel, 1998. "Yes, 'It' Did Happen Again: A Minsky Crisis Happened in Asia," Economics Working Paper Archive wp_234, Levy Economics Institute.
    8. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
    9. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
    10. McKinnon, Ronald I., 2004. "The East Asian dollar standard," China Economic Review, Elsevier, vol. 15(3), pages 325-330.
    11. repec:rus:hseeco:123922 is not listed on IDEAS
    12. Ronald I. McKinnon & Huw Pill, 1998. "International Overborrowing: A Decomposition of Credit and Currency Risks," Working Papers 98004, Stanford University, Department of Economics.
    13. Hyman P. Minsky, 1998. "Uncertainty and the Institutional Structure of Capitalist Economies," Macroeconomics 9809015, EconWPA.
    14. Marcus Miller & Pongsak Luangaram, 1998. "Financial crisis in East Asia: bank runs, asset bubbles and antidotes," National Institute Economic Review, National Institute of Economic and Social Research, vol. 165(1), pages 66-82, July.
    15. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
    16. Özlem Onaran, 2006. "Speculation-led growth and fragility in Turkey: Does EU make a difference or "can it happen again"?," Department of Economics Working Papers wuwp093, Vienna University of Economics, Department of Economics.
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    Cited by:
    1. Jan Toporowski, 2007. "European Banks In The Developing World," Working Papers 151, Department of Economics, SOAS, University of London, UK.
    2. Chang, Kuang-Liang & Chen, Nan-Kuang & Leung, Charles Ka Yui, 2012. "The dynamics of housing returns in Singapore: How important are the international transmission mechanisms?," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 516-530.

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