The political economy of the Ecuadorian financial crisis

Gabriel Martínez

Cambridge Journal of Economics, 2006, vol. 30, issue 4, 567-585

Abstract: This paper takes the unusual step of exploring economic hypotheses through interviews with key economic agents. It focuses on the causes of Ecuador's 1999 banking collapse, within an eclectic framework with Minskian elements. Broad support is found for 'endogenous' explanations of financial crises and little backing for explanations such as accidents or policy mistakes. Interviewees argued that after the stabilisation programme of 1992, agents became euphoric and accumulated debt to finance imprudent levels of expansion; that incentives for moral hazard led to financial corruption and excessive risk taking; and that weak regulation after financial liberalisation encouraged financial fragility. Copyright 2006, Oxford University Press.

Date: 2006
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