TY  - JOUR
AU  - Edwards,Sebastian
TI  - Crisis Prevention: Lessons from Mexico and East Asia
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7233
PY  - 1999
Y2  - July 1999
UR  - http://www.nber.org/papers/w7233
L1  - http://www.nber.org/papers/w7233.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu
AB  - This paper provides a comparative analysis of the East Asian and Mexican crises, and draws lessons for the emerging economies. Although much of the discussion concentrates on East Asia and Mexico, I also draw on the history of some previous crisis episodes. I argue that in spite of the efforts to understand the anatomy of currency crises, there are still a large number of controversial and unresolved issues.  More to the point, I argue that some of the lessons extracted from these crises are based on a misreading of the historical record.  As a result, some of the policy implications that have emerged from this debate are, to say the least, questionable.  In particular, I make two points: First, I argue that, in general, current account ratios have limited usefulness in determining a country's financial health. Although I fall short of taking the position that the current account is completely irrelevant, I do argue that a rigid interpretation of current account ratios may be highly misleading.  Second, I argue that the rapidly growing popularity of controls on capital inflows as a device for reducing external vulnerability is rooted in a misreading of the recent history of external crises.
ER  -