Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Mexican Peso Crisis? How Much Did We Know? When Did We Know It?

Contents:

Author Info

  • Sebastian Edwards

Abstract

The Mexican crisis of 1994 raised throughout the world a number of questions about the sustainability -- and even the merits -- of the market oriented reform process in Latin America and other regions. Understanding how events unfolded in Mexico during the early 1990s continues to be fundamentally important to assess the mechanics of currency crises. More importantly, perhaps, the eruption of the East Asian currency crises in the summer and fall 1997 has raised the question of whether the lessons from Mexico have indeed been learned by policy makers, private sector analysts and international civil servants. More specifically, as a result of the recent events in South East Asia many observers have argued that the international financial organizations -- the IMF and the World Bank -- and the governments of the advanced countries have failed to revamp the early warning system that was supposed to prevent a repetition of a Mexico-style crisis. This paper analyzes the causes behind the Mexican crisis, emphasizing the role of capital inflows, inflationary inertia and real exchange rate overvaluation. I also ask a number of questions regarding the predictability of the crisis: Should Wall Street analysts have known that things were getting out of hand? And if they did, why didn't they alert their clients? And, how much did officials at the US Treasury know about the depth of the Mexican problems? And, what was the role of the media? I conclude that although the US Treasury was fully aware of what was going on, most private sector analysts were unaware of the seriousness of the situation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w6334.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6334.

as in new window
Length:
Date of creation: Dec 1997
Date of revision:
Publication status: published as Sebastian Edwards, 1998. "The Mexican Peso Crisis: How Much Did We Know? When Did We Know It?," The World Economy, Blackwell Publishing, vol. 21(1), pages 1-30, 01.
Handle: RePEc:nbr:nberwo:6334

Note: IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Sebastian Edwards, 1988. "Structural Adjustment Policies in Highly Indebted Countries," NBER Working Papers 2502, National Bureau of Economic Research, Inc.
  2. Claudio M. Loser & Eliot Kalter, 1992. "Mexico," IMF Occasional Papers 99, International Monetary Fund.
  3. Robert P. Flood & Peter Isard, 1988. "Monetary Policy Strategies," NBER Working Papers 2770, National Bureau of Economic Research, Inc.
  4. Oks, Daniel & van Wijnbergen, Sweder, 1994. "Mexico after the debt crisis : is growth sustainable?," Policy Research Working Paper Series 1378, The World Bank.
  5. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1995. "The Collapse of the Mexican Peso: What Have We Learned?," NBER Working Papers 5142, National Bureau of Economic Research, Inc.
  6. Calvo, Guillermo A. & Mendoza, Enrique, 1997. "Rational Herd Behavior and the Globalization of Securities Markets," Working Papers, Duke University, Department of Economics 97-26, Duke University, Department of Economics.
  7. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, Elsevier, vol. 41(3-4), pages 235-264, November.
  8. Jeffrey Frankel & Miles Kahler, 1993. "Regionalism and Rivalry: Japan and the United States in Pacific Asia," NBER Books, National Bureau of Economic Research, Inc, number fran93-1, July.
  9. Guillermo A. Calvo, 1995. "Varieties of Capital-Market Crises," IDB Publications 5721, Inter-American Development Bank.
  10. Edwards, Sebastian & Edwards, Alejandra Cox, 1991. "Monetarism and Liberalization," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226184890, June.
  11. Helmut Reisen, 1995. "Managing Temporary Capital Inflows: Lessons from Asia and Latin America," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 34(4), pages 395-427.
  12. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 219-294.
  13. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262061546, December.
  14. McKinnon, Ronald I., 1982. "The order of economic liberalization: Lessons from Chile and Argentina," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 17(1), pages 159-186, January.
  15. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Christina Bannier, 2003. "The Role of Information Disparity in the 1994/95 Mexican Peso," International Finance, EconWPA 0310001, EconWPA.
  2. Arminio Fraga & Daniel L. Gleizer, 2001. "Constrained Discretion and Collective Action Problems: Reflections on the Resolution of International Financial Crises," Working Papers Series, Central Bank of Brazil, Research Department 34, Central Bank of Brazil, Research Department.
  3. Chowdhry, Bhagwan & Goyal, Amit, 2000. "Understanding the financial crisis in Asia," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 8(2), pages 135-152, May.
  4. Etienne Gagnon, 2009. "Price Setting During Low and High Inflation: Evidence from Mexico," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(3), pages 1221-1263, August.
  5. Broner, Fernando A, 2006. "Discrete Devaluations and Multiple Equilibria in a First Generation Model of Currency Crises," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5876, C.E.P.R. Discussion Papers.
  6. Mora, Ricardo & Siotis, Georges, 2005. "External factors in emerging market recoveries: An empirical investigation," European Economic Review, Elsevier, Elsevier, vol. 49(3), pages 683-702, April.
  7. Bordo, Michael D. & Schwartz, Anna J., 2000. "Measuring real economic effects of bailouts: historical perspectives on how countries in financial distress have fared with and without bailouts," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 53(1), pages 81-167, December.
  8. Kohsaka, Akira, 2004. "A fundamental scope for regional financial cooperation in East Asia," Journal of Asian Economics, Elsevier, Elsevier, vol. 15(5), pages 911-937, October.
  9. Osakwe, Patrick & Schembri, Lawrence, 1999. "Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico," Working Papers, Bank of Canada 99-10, Bank of Canada.
  10. Sebastian Edwards, 1999. "Crisis Prevention: Lessons from Mexico and East Asia," NBER Working Papers 7233, National Bureau of Economic Research, Inc.
  11. Richard Hemming & Axel Schimmelpfennig & Michael Kell, 2003. "Fiscal Vulnerability and Financial Crises in Emerging Market Economies," IMF Occasional Papers 218, International Monetary Fund.
  12. Arbache, Jorge Saba, 2004. "Do Structural Reforms always Succeed? Lessons from Brazil," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  13. Alejandro Diaz-Bautista & Cesar Alfredo Olivas Andrade, 2005. "Un Análisis de cointegración con corrección de errores de las Fugas de Capital y la Inestabilidad Política en México , An econometric model of capital flight in Mexico," International Finance, EconWPA 0511004, EconWPA.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6334. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.