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Journal Article
The Mexican peso crisis
Hoping to avoid an economic slowdown during 1994, Mexico tried to maintain its quasi-pegged exchange rate while limiting monetary tightening by engaging in massive sterilized intervention-a policy that is not sustainable for long. The ultimate result was a collapse of the exchange rate, soaring interest rates, and probably a far worse recession than would have occurred if monetary policy had been tightened. ; The author of this article asks whether Mexican policy mistakes made devaluation of the peso inevitable, considering particularly Mexico's policy actions during 1994-as well as options ...
Journal Article
The Mexican economic crisis: alternative views
The authors of this article suggest that many of the explanations for the 1994 crisis are based on questionable assumptions and dubious analysis. They contend that, when trying to explain the crisis, most authors have concentrated on the wrong economic "fundamentals." They challenge the conventional view that the crisis was caused by a combination of flawed fiscal, monetary, and exchange rate policies. Their explanation for the crisis belongs in an alternative camp that emphasizes the vulnerability of the Mexican financial system to swings in expectations and investor confidence. ; In their ...
Journal Article
The banking sector rescue in Mexico
In Mexico the December 1994 peso devaluation provoked a profound economic downturn in that country and revealed a fragile banking sector. Fearful that the financial system would collapse under a rising level of past due loans, the Mexican government mounted a rescue of the banking sector by intervening in the daily operations of some problem banks while establishing a series of capitalization and restructuring programs available to all banks. ; This article examines Mexico's bank rescue efforts (1995-98) with a particular focus on the role of the deposit insurance fund, the Bank Fund for the ...
Journal Article
A predictable and avoidable Mexican meltdown
Journal Article
Mexico's liquidity-driven financial panic
Working Paper
Effects of devaluation with a partial wage floor
Working Paper
Corporate dollar debt and depreciations: much ado about nothing?
Much has been written recently about the problems for emerging markets that might result from a mismatch between foreign-currency denominated liabilities and assets (or income flows) denominated in local currency. In particular, several models, developed in the aftermath of financial crises of the late 1990s, suggest that the expansion in the "peso" value of "dollar" liabilities resulting from a devaluation could, via a net-worth effect, offset the expansionary competitiveness effect. Assessing which effect dominates, however, is ultimately an empirical matter. In this vein, we construct ...
Journal Article
Liberalization, privatization, and crash: Mexico's banking system in the 1990's
Although Mexico's 1994 peso devaluation and subsequent capital outflows shook the nation's banking system, the foundations of the banking crisis were laid much earlier. ; Econometric evidence suggests that in the wake of the 1991-92 bank privatizations, Mexico's banks entered a market share struggle in which they incurred short-term losses at the margin, perhaps in the interests of greater expected gains over the long term. ; Euphoric investor behavior and a rising economy may have aggravated the situation by making risky borrowers more difficult to identify.
Journal Article
Texas' border: on the front line of change