A Minskian Analysis of Financial Crisis in Developing Countries

Susan K. Schroeder
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Susan K. Schroeder: New School University and University of Bremen, http://www.newschool.edu

No 2002-09, SCEPA Working Papers from Schwartz Center for Economic Policy Analysis (SCEPA), The New School

Abstract: 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.

Keywords: Asian crisis; country risk; developing countries; financial crisis; financial fragility; Minsky; Ponzi; Thailand (search for similar items in EconPapers)
JEL-codes: F4 E1 O5 D (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-fin, nep-ifn, nep-pke and nep-rmg
Date: 2002-08
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Persistent link: http://EconPapers.repec.org/RePEc:epa:cepawp:2002-09

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