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A Minskian Analysis of Financial Crisis in Developing Countries



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.

Suggested Citation

  • Susan K. Schroeder, 2002. "A Minskian Analysis of Financial Crisis in Developing Countries," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-09, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  • Handle: RePEc:epa:cepawp:2002-09

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    References listed on IDEAS

    1. Morris Goldstein & Graciela Kaminsky & Carmen Reinhart, 2017. "Methodology and Empirical Results," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 11, pages 397-436, World Scientific Publishing Co. Pte. Ltd..
    2. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    3. Anwar M. Shaikh, 1995. "The Stock Market and the Corporate Sector: Profit-Based Approach," Economics Working Paper Archive wp_146, Levy Economics Institute.
    4. Hyman P. Minsky, 1980. "Capitalist Financial Processes and the Instability of Capitalism," Journal of Economic Issues, Taylor & Francis Journals, vol. 14(2), pages 505-523, June.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Unanswered Questions on Financialisation in Developing Economies
      by Carolina Alves in Development Economics on 2018-04-05 06:00:13


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    Cited by:

    1. M Cruz, 2003. "A Minskyian Crisis: An Application to the 1994-95 Mexican Experience," The School of Economics Discussion Paper Series 0325, Economics, The University of Manchester.
    2. Beshenov, Sergey & Rozmainsky, Ivan, 2015. "Hyman Minsky's financial instability hypothesis and the Greek debt crisis," Russian Journal of Economics, Elsevier, vol. 1(4), pages 419-438.
    3. Iancu, Aurel, 2011. "Models of Financial System Fragility," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 230-256, March.

    More about this item


    Asian crisis; country risk; developing countries; financial crisis; financial fragility; Minsky; Ponzi; Thailand;

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • D - Microeconomics

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