This paper outlines a set of financial policies that can help make financial crises less likely in emerging market countries. To justify these policies, the paper first explains what a financial crisis is, the factors that promote a financial crisis and the dynamics of a financial crisis. It then examines twelve basic areas of financial policies to prevent financial crises: 1) prudential supervision, 2) accounting and disclosure requirements, 3) legal and judicial systems, 4) market-based discipline, 5) entry of foreign banks, 6) capital controls, 7) Reduction of the role of state-owned financial institutions, 8) restrictions on foreign-denominated debt, 9) elimination of too-big-to-fail in the corporate sector, 10) sequencing financial liberalization, 11) monetary policy and price stability, 12) exchange rate regimes and foreign exchange reserves.
*Published:
Mishkin, Frederic S. and Miguel A. Savastano. "Monetary Policy Strategies For Emerging Market Countries: Lessons From Latin America," Chinese Economic Studies, 2002, v44(2/3,Summer), 45-82.
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