Financial Crises

Financial Crises: Lessons from the Past, Preparation for the Future

GERARD CAPRIO
JAMES A. HANSON
ROBERT E. LITAN
Copyright Date: 2005
Pages: 291
https://www.jstor.org/stable/10.7864/j.ctt127zsk
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  • Book Info
    Financial Crises
    Book Description:

    Throughout the 1990s, numerous financial crises rocked the world financial sector. The Asian bubble burst, for example; Argentina and Brazil suffered currency crises; and the post-Soviet economy bottomed out in Russia. In Financial Crises, a distinguished group of economists and policy analysts examine and draw lessons from attempts to recover from past crises. They also consider some potential hazards facing the world economy in the 21st century and discuss ways to avoid them and minimize the severity of any future downturn. This important new volume emerges from the seventh annual conference on emerging markets finance, cosponsored and organized by the World Bank and the Brookings Institution. In the book, noted experts address the following questions: How effective were post-crisis policies in Latin America, Eastern Europe, and East and Central Asia? Where do international financial markets stand ten years after the worldwide debt crisis? How can the provision of financial services resume vigorously, yet safely? What are the viable policy options for reducing systemic financial vulnerability? What will the next emerging-market financial crisis look like? Will lessons learned from past experiences help to avoid future disasters? How can nations reform their pension systems to deal with retirement challenges in the 21st century?

    eISBN: 978-0-8157-9796-8
    Subjects: Economics, Business, Political Science

Table of Contents

  1. Front Matter
    (pp. I-IV)
  2. Table of Contents
    (pp. V-VI)
  3. 1 Introduction
    (pp. 1-14)
    GERARD CAPRIO, JAMES HANSON and ROBERT E. LITAN

    The calm before the storm? That question dominated the stage at the seventh annual conference on emerging markets finance, cosponsored by the World Bank and the Brookings Institution and held at Brookings in late April 2005.

    At the time of the conference, it had been a little less than eight years since the onset of the Asian financial crisis, an event that had depression-like effects throughout much of Asia and, for a time, seemed to threaten global economic stability. That this outcome never happened can be attributed to a combination of aggressive monetary easing by the Federal Reserve Board in...

  4. 2 Postcrisis Challenges and Risks in East Asia and Latin America: Where Do They Go from Here?
    (pp. 15-62)
    JAMES A. HANSON

    Beginning in the mid-1990s, Latin America and East Asia were rocked by a series of financial sector and currency crises. The Mexican crisis began in late 1994 and then spread quickly to Argentina, where damage was limited by sound policy and efforts to strengthen the financial system.¹ Jamaica also suffered a severe crisis in the mid-1990s, following a poorly managed financial liberalization. In 1997 crises unexpectedly hit Asia. The “miracle” countries—Indonesia, Korea, Malaysia, and Thailand—were hit hardest, the Philippines was less affected. China, which continued to grow rapidly, is not considered a crisis country and is not treated...

  5. 3 Banking System Crises and Recovery in the Transition Economies of Europe and Central Asia: An Overview
    (pp. 63-86)
    FERNANDO MONTES-NEGRET and THOMAS MULLER

    Over the past fifteen years, the transition countries in the Balkans, the Baltics, Central and Eastern Europe, and the Commonwealth of Independent States (CIS) experienced nothing short of a paradigmatic change in all political, economic, and social dimensions. This chapter provides a brief overview of financial sector developments in this increasingly heterogeneous region, following the chaotic, prolonged, and costly crises of the 1990s.

    After the fall of the Berlin Wall, all transition countries experienced more or less severe systemic financial crises, and most of them went through several phases of reform, usually starting with severe defaults, followed by lax bank...

  6. 4 Sovereign Debt in Developing Countries with Market Access: Help or Hindrance?
    (pp. 87-120)
    INDERMIT GILL and BRIAN PINTO

    Sovereign debt can help developing countries. It enables their governments to facilitate growth take-offs by investing in a critical mass of infrastructure projects and in the social sectors when taxation capacity is limited or the alternative would be to print money and compromise macro-economic stability. Debt also facilitates tax smoothing and countercyclical fiscal policies, essential for reducing the volatility of output, and it permits an equitable alignment of benefits and costs for long-gestation projects by shifting taxation away from current generations.

    This is what theory tells us. There is every reason to believe that governments that borrow and spend prudently...

  7. 5 The Next Emerging-Market Financial Crisis: What Might It Look Like?
    (pp. 121-210)
    MORRIS GOLDSTEIN and ANNA WONG

    This chapter is a speculative exercise in thinking about what the next emerging-economy financial crisis might look like. By a financial crisis, we mean a currency crisis, a banking crisis, a debt crisis, or some combination of the three.¹ The aim of the chapter is neither to identify the one or two emerging economies most vulnerable to a crisis today nor to assess the likelihood that a crisis will occur this year. It is instead to offer some thoughts on the following question: if a crisis affecting a group of emerging economies were to take place sometime, say, over the...

  8. 6 Financial Risks Ahead: Views from the Private Sector
    (pp. 211-216)

    One of the unique characteristics of the annual World Bank–Brookings conference is that it brings together academic scholars and practitioners from the “real world” to discuss developments in emerging-markets finance. This year’s conference featured a panel of three practitioners with expertise in the field: David Wyss, chief economist of Standard & Poor’s; Don Hanna, managing director and global head of emerging markets economic and market analysis of Citigroup; and Khalid Sheikh, senior vice president of ABN Amro Bank. A summary of their views and their responses to some questions from the participants follows.

    David Wyss led off the panel...

  9. 7 Starting over Safely: Rebuilding Banking Systems
    (pp. 217-256)
    GERARD CAPRIO and PATRICK HONOHAN

    When the financial crisis breaks, the first priority of policymakers is containment. In that acute phase, the urgent may displace the important in the scramble for survival. Already, however, the decisions taken can determine much of the loss allocation and have a long-lasting and hard-to-unwind influence on moral hazard through the expectations and perceptions of market participants. Once the acute phase is over and the resolution phase has begun, policymakers tend to be more aware of the longer-term implications of their actions, even if they see themselves as cleaning up a mess rather than setting the financial system on a...

  10. 8 Old-Age Income Support in the Twenty-first Century: Conceptual Framework and Select Issues of Implementation
    (pp. 257-278)
    ROBERT HOLZMANN

    The past decade has brought increased recognition of the importance of pension systems for the economic stability of nations and the security of their aging populations. In developing countries, the traditional systems of support for the elderly are being eroded by migration, urbanization, and other factors that break down extended families. At the same time, pension systems, where they exist, are proving limited and increasingly costly in fiscal terms.

    For the past ten years, the World Bank has taken a leading role in addressing these challenges through its support for pension reform around the world. The World Bank has been...

  11. Contributors
    (pp. 279-280)
  12. Index
    (pp. 281-292)