Post liberalization global financial crises: Comparison with 2006-2007 fluctuations

Leyla Baştav
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Leyla Baştav: Bankacılık Düzenleme ve Denetleme Kurumu

Iktisat Isletme ve Finans, 2009, vol. 24, issue 276, 98-115

Abstract: The study aims to analyze post-liberalization episode movements with emphasis on crises and turbulances of 1990’s and 2000’s and provide macroeconomic policy advice. During 1990’s crises, moral hazard due to insufficient supervision in financial markets and intermediate foreign exchange regimes under liberal capital account have been relevant. During 2006-2007, global inflationary growth and anti-inflationary policies have prevailed economic conjuncture. Developed economies’ policies have caused imbalances in financial markets already in vulnerability due to asset price bubbles and credit expansion. The vulnerabilities have brought sudden stop, self-fulfilling prophecies further fuelling outflows with worsening expectations. In the new global structure, crises mostly stem from financial markets, money market imbalances, self-fulfilling prophecy and sudden stop. Enhanced supervision in financial markets, considering macroeconomic policies’ effect on markets and curbing capital flows are needed. Also imbalances should be removed via changing pattern of savings, absoption and foreign deficits by appropriate macroeconomic policies.

Keywords: Post- liberalization crises; Financial globalization; Sudden stop; Self fulfilling prophecies; Capital flow controls (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Date: 2009
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