Controlling the risk: a case study of the Indian liquidity crisis 1990-92

Ephraim Clark and Geeta Lakshmi
Additional contact information
Geeta Lakshmi: Plymouth University Business School, Plymouth, UK, Postal: Plymouth University Business School, Plymouth, UK

Journal of International Development, 2003, vol. 15, issue 3, 285-298

Abstract: Over the period 1990-92, India experienced a foreign exchange crisis complicated by political turmoil that led to three rapid downgrades of its credit rating within the short space of a year. However, India did not default or reschedule its debt and with the help of foreign exchange loans after 44 years of socialism, proceeded with a structural, market-oriented reform of the economy. This crisis differs from the subsequent crises in Mexico, Asia and Russia that followed later in the 1990s in that it did not spread to other countries. The reaction of the international markets was mild. Net flows of private foreign capital remained positive over the crisis period and the three rating migrations increased the country's cost of borrowing by only 1 per cent. The reaction of domestic markets was also positive and by the end of 1991 the local stock market had started an impressive bull run. Thus, the case of India 1990-92 is an interesting study in macroeconomic crisis management with lessons for the future. The crisis was short, damage to investor confidence was minimal, and a turnaround was achieved within three years. This study attempts to examine the crisis, its handling and reaction of the market to downgradings. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1002/jid.948 Link to full text; subscription required (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:15:y:2003:i:3:p:285-298

DOI: 10.1002/jid.948

Access Statistics for this article

Journal of International Development is currently edited by Paul Mosley and Hazel Johnson

More articles in Journal of International Development from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().