[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fip/fedmsr/212.html
   My bibliography  Save this paper

The balance of payments and borrowing constraints: an alternative view of the Mexican crisis

Author

Listed:
  • Andrew Atkeson
  • José-Víctor Ríos-Rull
Abstract
In this paper we develop a model in which a country faces a balance of payments crisis if constraints on its international borrowing bind. We use the model to describe the dynamics of the trade balance, capital account, and balance of payments of a country that borrows to finance consumption following sweeping macroeconomic and structural reforms and then hits constraints on its international borrowing. We compare the predictions of this theoretical example with events in Mexico from 1987 through 1995.

Suggested Citation

  • Andrew Atkeson & José-Víctor Ríos-Rull, 1996. "The balance of payments and borrowing constraints: an alternative view of the Mexican crisis," Staff Report 212, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:212
    as

    Download full text from publisher

    File URL: http://minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=492
    Download Restriction: no
    File URL: http://minneapolisfed.org/research/sr/sr212.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077, Elsevier.
    2. Maurice Obstfeld, 1986. "Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 1-22, February.
    3. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, in: Inflation: Causes and Effects, pages 41-98, National Bureau of Economic Research, Inc.
    4. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
    5. Sergio Rebelo & Carlos A. Végh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188, National Bureau of Economic Research, Inc.
    6. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    7. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
    8. Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1995. "The Collapse of the Mexican Peso: What Have We Learned?," Working Papers 95-22, C.V. Starr Center for Applied Economics, New York University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Del Negro & Francesc Obiols-Homs, 2001. "Has monetary policy been so bad that it is better to get rid of it? The case of Mexico," Proceedings, Federal Reserve Bank of Cleveland, pages 404-439.
    2. Sebastian Edwards, 2002. "Does the Current Account Matter?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 21-76, National Bureau of Economic Research, Inc.
    3. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December.
    4. Eduardo Fernández-Arias & Davide Lombardo, 2002. "Market Discipline and Exuberant Foreign Borrowing," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 11, pages 333-360, Central Bank of Chile.
    5. Rajesh Singh & Chetan Subramanian, 2009. "Temporary Stabilizations, Sudden Stops, and Asset Prices," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 333-347, May.
    6. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
    7. V. V. Chari & Patrick J. Kehoe, 2003. "Hot Money," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1262-1292, December.
    8. Lagunoff, Roger & Schreft, Stacey L., 2001. "A Model of Financial Fragility," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 220-264, July.
    9. M Cruz, 2003. "A Minskyian Crisis: An Application to the 1994-95 Mexican Experience," Economics Discussion Paper Series 0325, Economics, The University of Manchester.
    10. Pozo, Jorge, 2023. "Bank risk-taking in emerging economies: Empirical evidence and theory," Journal of Financial Stability, Elsevier, vol. 67(C).
    11. Ho-Don Yan, 1999. "Intertemporal current account balance and the East Asian currency crises," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(3), pages 277-288, August.
    12. Felipe Meza, 2008. "Financial Crisis, Fiscal Policy, and the 1995 GDP Contraction in Mexico," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1239-1261, September.
    13. Chetan Subramanian & Jungsoo Park, 2004. "Exchange Rate Based Stabilization with Sudden Restrictions on Capital Flows," Econometric Society 2004 Far Eastern Meetings 748, Econometric Society.
    14. Artus P., 2001. "What Exchange - Rate System For Emerging Countries?," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 27-60, January -.
    15. Pompeo Della Posta, 2002. "Modelli di crisi valutarie e misure di politica economica," Moneta e Credito, Economia civile, vol. 55(219), pages 237-262.
    16. Aßmann, Christian, 2008. "Assessing the Effect of Current Account and Currency Crises on Economic Growth," Economics Working Papers 2008-01, Christian-Albrechts-University of Kiel, Department of Economics.
    17. Jaime Guajardo, 2004. "Financial Frictions and Business Cycles in Developing Countries," Econometric Society 2004 Latin American Meetings 307, Econometric Society.
    18. Mr. Jaime Guajardo, 2008. "Financial Frictions and Business Cycles in Middle-Income Countries," IMF Working Papers 2008/020, International Monetary Fund.
    19. Jaime C. Guajardo, 2007. "Financial Frections and Business Cycles in Middle Income Countries," Working Papers Central Bank of Chile 444, Central Bank of Chile.
    20. Aßmann, Christian, 2007. "Determinants and Costs of Current Account Reversals under Heterogeneity and Serial Correlation," Economics Working Papers 2007-17, Christian-Albrechts-University of Kiel, Department of Economics.
    21. Hernández Trillo, Fausto & Villagómez Amezcua, Alejandro, 2000. "La estructura de la deuda pública en México: Lecciones y perspectivas," IDB Publications (Working Papers) 2108, Inter-American Development Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614, Elsevier.
    2. Julio A. Santaella & Abraham E. Vela, 2005. "The 1987 Mexican Disinflation Program: An Exchange-rate-based Stabilization?," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 5-40, January-J.
    3. Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1996. "The Mexican peso crisis: Sudden death or death foretold?," Journal of International Economics, Elsevier, vol. 41(3-4), pages 265-283, November.
    4. Patrick Artus, 1998. "Le financement de la croissance par endettement extérieur," Revue Économique, Programme National Persée, vol. 49(1), pages 165-179.
    5. Talan Iscan, 1997. "Devaluations and aggregate output fluctuations: a random coefficient regression model for Mexico," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1575-1584.
    6. Artus P., 2001. "What Exchange - Rate System For Emerging Countries?," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 27-60, January -.
    7. Block, Thorsten, 2001. "Economic stagnation in Weimar Germany: A structuralist perspective," Research Memorandum 025, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    8. William R. Melick, 1996. "Estimation of speculative attack models: Mexico yet again," BIS Working Papers 36, Bank for International Settlements.
    9. Osakwe, Patrick N. & Schembri, Lawrence L., 2002. "Real effects of collapsing exchange rate regimes: an application to Mexico," Journal of International Economics, Elsevier, vol. 57(2), pages 299-325, August.
    10. Carlos Ibarra, 1999. "Disinflation and the December 1994 Devaluation in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(1), pages 55-69.
    11. Julio A. Santaella & Mr. Abraham Everardo Vela, 1996. "The 1987 Mexican Disinflation Program: An Exchange-Rate-Based Stabilization?," IMF Working Papers 1996/024, International Monetary Fund.
    12. Block, Thorsten H., 2002. "Economic stagnation in Weimar Germany: a structuralist perspective," Structural Change and Economic Dynamics, Elsevier, vol. 13(2), pages 127-150, June.
    13. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    14. Kamin, Steven B., 2001. "Real exchange rates and inflation in exchange-rate-based stabilizations: an empirical examination," Journal of Development Economics, Elsevier, vol. 64(1), pages 237-253, February.
    15. Edwards, Sebastian & Vegh, Carlos A., 1997. "Banks and macroeconomic disturbances under predetermined exchange rates," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 239-278, October.
    16. Sebastian Edwards, 1997. "The Mexican Peso Crisis? How Much Did We Know? When Did We Know It?," NBER Working Papers 6334, National Bureau of Economic Research, Inc.
    17. Anne O. Krueger, 2019. "Increased capital mobility and policy reform in developing countries," Indian Economic Review, Springer, vol. 54(1), pages 113-133, December.
    18. Castro, Vitor & Veiga, Francisco Jose, 2004. "Political business cycles and inflation stabilization," Economics Letters, Elsevier, vol. 83(1), pages 1-6, April.
    19. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Rating the Rating Agencies," MPRA Paper 24578, University Library of Munich, Germany.
    20. Eichengreen, Barry, 1997. "The Baring Crisis in a Mexican Mirror," Department of Economics, Working Paper Series qt81j7s02s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.

    More about this item

    Keywords

    Mexico; Financial crises - Mexico; Balance of payments;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:212. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.