Dealing with Financial Crises the Latin American Way: The Argentinean, Brazilian and Mexican Experiences

Moritz Cruz and Bernard Walters

Chapter 16 in Minsky, Crisis and Development, 2010, pp 294-301 from Palgrave Macmillan

Abstract: Abstract According to Minsky (1982, 1986), a crisis can be mitigated if, during the economy’s evolution from robustness to fragility, the central bank and fiscal authorities apply counteractive economic policies. These consist of acting as lender of last resort and running a large government deficit, thereby blunting the fall in profits. In other words, the seminal financial instability hypothesis (FIH) framework suggests an activist government may be able to block the endogenous evolution of expectations progressing to instability (see Part I and, with respect to Argentina, previous chapter). However, it is striking that during the recent financial crises in Latin America,1 such policies were, in most cases, not adopted.

Keywords: Exchange Rate; Central Bank; Currency Crisis; Policy Space; Investor Sentiment (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1057/9780230292321_17

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