Asian and Mexican financial crises Case Study 2022

Study and consider the features of the Asian and Mexican financial crises of the late 1990s. Then, post a response of at least 200 words to the following prompt: Discuss the similarities and differences between the two in terms of their causes and impacts on the economies of the two countries and on the global economy. Discuss the similarities and differences in the solutions that were implemented to end the crises. In what ways, if any, does the current situation in Turkey and its currency, the Turkish Lira, resemble that of Asia or Mexico?

Running head: GLOBAL ECONOMY
Global Economy
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1GLOBAL ECONOMY
Table of Contents
Asian and Mexican financial crises.................................................................................................2
Reference List..................................................................................................................................3

2GLOBAL ECONOMY
Asian and Mexican financial crises
The Asian financial crises of 1997 was more severe than the Mexican crises of 1994 in
terms of sudden shock and number of population suffered. Though the devaluation of the
currency changed the attitude of investors and caused huge capital outflows in both the cases.
Similarly, the sudden shock of capital outflows affected the domestic market financially and
unstable the productive sector (Rizvi, Arshad & Alam, 2015). The deviation of trend output due
to recession was about 15% in both South Korea and Mexico however, a gap of 25-30%
recorded in Thailand, Malaysia and Indonesia.
In case of, Asian crisis aid of $110 billion from IMF helped the economy to stabilize and
they curtailed public spending and induced interest rates and tax rates in order to recover.
Mexican government used assistance offered by the IMF and American tax payer dollars for
securities guarantees and swap facilities (Sensoy et al., 2014). Both the economies took
assistance from IMF and implemented some monetary and fiscal policies controls.
The Turkish crises influenced by excessive private debt of foreign currency and higher
current account deficit. It led to high inflation, rising loan defaults and plunging in currency
value. Unlike, currency devaluation there is no existence of high inflation or fiscal deficits in
both Asian and Mexican economies.

3GLOBAL ECONOMY
Reference List
Rizvi, S. A. R., Arshad, S., & Alam, N. (2015). Crises and contagion in Asia Pacific—Islamic
v/s conventional markets. Pacific-Basin Finance Journal, 34, 315-326.
Sensoy, A., Soytas, U., Yildirim, I., & Hacihasanoglu, E. (2014). Dynamic relationship between
Turkey and European countries during the global financial crisis. Economic Modelling,
40, 290-298.