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Dealing with Financial Crises the Latin American Way: The Argentinean, Brazilian and Mexican Experiences

In: Minsky, Crisis and Development

Author

Listed:
  • Moritz Cruz
  • Bernard Walters

Abstract

According to Minsky (1982, 1986), a crisis can be mitigated if, during the economy’s evolution from robustness to fragility, the central bank and fiscal authorities apply counteractive economic policies. These consist of acting as lender of last resort and running a large government deficit, thereby blunting the fall in profits. In other words, the seminal financial instability hypothesis (FIH) framework suggests an activist government may be able to block the endogenous evolution of expectations progressing to instability (see Part I and, with respect to Argentina, previous chapter). However, it is striking that during the recent financial crises in Latin America,1 such policies were, in most cases, not adopted.

Suggested Citation

  • Moritz Cruz & Bernard Walters, 2010. "Dealing with Financial Crises the Latin American Way: The Argentinean, Brazilian and Mexican Experiences," Palgrave Macmillan Books, in: Daniela Tavasci & Jan Toporowski (ed.), Minsky, Crisis and Development, chapter 16, pages 294-301, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29232-1_17
    DOI: 10.1057/9780230292321_17
    as

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