TY  - JOUR
AU  - Mishkin,Frederic S.
TI  - Understanding Financial Crises: A Developing Country Perspective
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5600
PY  - 1997
Y2  - June 1997
UR  - http://www.nber.org/papers/w5600
L1  - http://www.nber.org/papers/w5600.pdf
N1  - Author contact info:
Frederic S. Mishkin
Columbia University
Graduate School of Business
Uris Hall 817
3022 Broadway
New York, NY 10027
Tel: 212-854-3488
Fax: 212/662-8474
E-Mail: fsm3@columbia.edu
AB  - This paper explains the puzzle of how a developing economy can shift from a path of reasonable growth before a financial crisis, as in Mexico in 1994, to a sharp decline in economic activity after a crisis occurs.  It does so by outlining an asymmetric information framework for analyzing banking and finan- cial crises in developing countries. The asymmetric inforamtion  framework shows why the banking sector is so important to the economy, and provides a rationale for bank regulation and supervision.  This asymmetric information framework is then used to understand why banking and financial crises occur and why they can have such a devastating effect on the economy countries. The paper concludes by discussing policy implications for developing countries. An important theme is that an appropriate institutional structure is critical to preventing banking and financial crises in developing countries and to reducing their undesirable effects if they should occur.
ER  -