Two Decades Later
Two Decades Later

Important Minskyan Lessons from the Mexican Peso Crisis

Summary/Abstract: In this paper we analyze financial crisis that hit Mexico in 1994 in order to discover common roots and patterns of financial crises in emerging markets. As we see it, orthodox economists are not capable of providing an adequate explanation of why do financial crises erupt in emerging markets. On the other hand, Minskyan liquidity explanation of international capital movements and his Financial Instability Hypothesis adjusted for the case of developing economies tell us that the roots of crises lie in overly optimistic expectations and consequent over-indebtedness ofeconomic units.

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