Financial Policies in Emerging Markets
The 1994-1995 Mexican Crisis was the first in a succession of financial crises to hit emerging markets, followed shortly thereafter by the Asian Financial Crisis during 1997-1998 (involving widespread negative consequences for Thailand, Indonesia, Malaysia, South Korea). And then Russia, Brazil, and Argentina had similar meltdowns. In almost every case, problems in the banking sector played a key role.
Every analysis of recent developments in emerging market economies must consider a couple of questions. The first involves to what degree was financial vulnerability relevant to the onset of the crises, while the second revolves around the connection between the exchange rate regime and financial risk assessments.
We develop an understanding of the impact financial policies have on emerging market economies as well, while forming several models derived from theoretical and empirical evidence, which suggest the relationship between financial policy and financial vulnerability.
