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The Balance Sheet Approach to Financial Crises in Emerging Markets

  • Jan Toporowski
  • Giovanni Cozzi
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    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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    File URL: http://www.levyinstitute.org/pubs/wp_485.pdf
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    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
    Contact details of provider: Web page: http://www.levyinstitute.org

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    1. 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.
    2. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
    3. 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.
    4. 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 and Business, Department of Economics.
    5. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    6. J.A. Kregel, 1998. "Yes, "It" Did Happen Again - A Minsky Crisis Happened in Asia," Macroeconomics 9805017, EconWPA.
    7. McKinnon, Ronald I. & Pill, Huw, 1998. "International Overborrowing: A Decomposition of Credit and Currency Risks," World Development, Elsevier, vol. 26(7), pages 1267-1282, July.
    8. 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.
    9. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373, March.
    10. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
    11. Hyman P. Minsky, 1998. "Uncertainty and the Institutional Structure of Capitalist Economies," Macroeconomics 9809015, EconWPA.
    12. repec:rus:hseeco:123922 is not listed on IDEAS
    13. McKinnon, Ronald I., 2004. "The East Asian dollar standard," China Economic Review, Elsevier, vol. 15(3), pages 325-330.
    14. 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.
    15. Jan Toporowski, 2006. "Methodology and Microeconomics in the Early Work of Hyman P. Minsky," Economics Working Paper Archive wp_480, Levy Economics Institute.
    16. Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
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