Expectations, the Business Cycle and the Mexican Peso Crisis Moritz Cruz, Edmund Amann & Bernard Walters

Using Minsky’s financial fragility hypothesis, this paper provides empirical evidence with particular attention paid to the role of domestic financial liberalization in explaining the 1994-95 ‘Peso’ crisis in Mexico. Minsky’s hypotheses about the evolution of expectations over the business cycle are tracked using business survey data. In addition, crisis indicators are constructed, reflecting the changing vulnerability of the economy to shocks. mexican_peso_crisis (Download the full text in PDF format)

Japanese Economic Recovery and the Macroeconomic Policy Mix Sukanya Bose

Japanese macroeconomic policy during the prolonged depression of the 1990s has been the reverse of what Keynes had recommended as the anti-deflationary strategy. The paper explores the three main pillars of macroeconomic policy for the Japanese economy in the recent years: financial policy, fiscal policy and monetary policy. japanese_recovery (Download the full text in PDF format)

Argentina’s Collapse Incited the Largest Default in History Joseph Stiglitz

Pundits agree this is merely the latest in a string of bail-outs, led by the International Monetary Fund (IMF), that squandered billions of dollars and failed to save the economies they were meant to help. Some claim the IMF was too lenient while others say it was too tough. And some see the problem as self-inflicted through profligate and corrupt spending by Argentina .Such attempts at blame-shifting are misguided: The default can be seen as the result of economic mistakes made over a decade. Understanding what went wrong provides important lessons. The problems began with the hyper-inflation of the 1980s.…

Argentina : A cautionary tale from South America Jayati Ghosh

The comprehensive mess in Argentina today almost defies belief. At the turn of the year, the financial and economic collapse was near total, with banks closed, the state of the currency (and even its very existence) in some doubt, rapidly increasing unemployment, decline in almost all public services and shortages of liquidity that threatened access to basic food and necessary goods for survival for much of the population. cautionary_tale (Download the full text in PDF format)