Lessons from the Mexico Crisis

Posted: 4 Mar 1998

See all articles by Nancy Birdsall

Nancy Birdsall

Center for Global Development

Michael Gavin

UBS Warburg

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Abstract

First, the paper discusses salient aspects of the Mexican reforms and its 1989-1994 recovery, making no attempt to be comprehensive but instead focusing on developments of direct relevance for the argument. Next, it discusses three important features of the crisis and renewed recovery: Recovery was rapid, the domestic financial system was pivotal, and fiscal policy was contractionary. The paper evaluates four reasons that are often given for the causes of the Mexican crisis: a faulty exchange-rate policy; low domestic saving; large current account deficits; and the issuance, mainly during 1994, of the tesobonos. Three alternative lessons of the crisis are presented.

JEL Classification: F34, F35

Suggested Citation

Birdsall, Nancy and Gavin, Michael and Hausmann, Ricardo, Lessons from the Mexico Crisis. Available at SSRN: https://ssrn.com/abstract=63169

Nancy Birdsall

Center for Global Development ( email )

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Michael Gavin (Contact Author)

UBS Warburg ( email )

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Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS) ( email )

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HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/ricardo-hausmann

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