Theoretical Research on Financial Crises in Emerging Market Countries (Regions)

Author: Liu Liya
Publisher:
Publish Date: 2004-10-01
Features: Since the collapse of the Bretton Woods system, financial crises have been a focal point of research in the field of international economics and finance. The reasons for this can be attributed to the frequent occurrence, widespread nature, and severe consequences of these crises. With the acceleration of financial globalization, the consequences of financial crises have severely impacted the stability of regional and even global economic and financial systems. In particular, in recent years, the rapid pace of opening up and economic globalization has been seen by many emerging market countries (regions) as meaning rapid economic growth and massive inflows of foreign capital. For many emerging market countries (regions), especially those in Asia and Latin America, the first half of the 1990s was characterized by extreme optimism in the market and rapid economic growth. However, the Mexican financial crisis of 1994–1995, the Asian financial crisis of 1997–1998, and the financial crises that occurred in Russia, Brazil, and several other Latin American countries between 1998 and 1999 easily shattered this prosperity. Although these crises shared some characteristics with previous crises, what is more important is that they revealed phenomena that had not been considered in past crisis theory research. Therefore, they hold significant theoretical and practical implications for the study of modern financial crises. Currently, there is no consensus in academia on the definition of a financial crisis. Goldsmith defines a financial crisis as a brief and sharp deterioration in all financial indicators or a set of financial indicators, such as short-term interest rates, asset prices (stocks, real estate, and land), and corporate solvency, as well as the collapse of financial institutions.