Output Costs of Currency and Balance of Payments Crises in Emerging Markets

The exchange rate plays an important role to trade, investment and macroeconomic risks of open economies. There are many factors that affect the exchange rate such as inflation, interest rates, balance of payments where remittance flows receive more and more attention of economists due to their increase in their values, particularly in emerging economies. This study uses data from 21 countries which are classified as emerging markets in the period between 2001 and 2013 to investigate the impacts of remittances on exchange rate. Through panel data estimations, we found that remittances increase the value of the local currencies, which is not altered by the 2008 global financial crisis.

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Balance-of-Payments Crises in Emerging Markets: Large Capital Inflows and Sovereign Governments Guillermo A. Calvo

Emerging Capital Markets in Turmoil ◽

10.7551/mitpress/2701.003.0019 ◽

2005 ◽

Cited By ~ 24

Keyword(s):

Emerging Markets ◽

Balance Of Payments ◽

Capital Inflows

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The Mexican Financial Crisis: Genesis, Impact, and Implications

Journal of Interamerican Studies and World Affairs ◽

10.2307/166271 ◽

1995 ◽

Vol 37 (2) ◽

pp. 57-82 ◽

Cited By ~ 8

Author(s):

Gary L. Springer ◽

Jorge L. Molina

Keyword(s):

Monetary Policy ◽

Financial Crisis ◽

Emerging Markets ◽

Interest Rates ◽

Presidential Elections ◽

Balance Of Payments ◽

Capital Flight ◽

Financial Problems ◽

Political Ferment

The financial problems faced by Mexico since late December 1994 are the result of a balance of payments crisis which developed earlier during the year when a number of economic and political developments came together to disrupt its financing plans. A combination of events — an increase in US interest rates, political ferment and presidential elections in Mexico, plus capital flight from Mexico which was prompted, in turn, by lax monetary policy during the last weeks of the Salinas administration — all helped contribute to, and culminated in, a collapse of the peso at the end of 1994. As a result, the incoming administration of President Ernesto Zedillo found itself in the position of having to devalue the peso, a move that sparked severe economic repercussions, including a crisis of confidence that spread beyond Mexico to affect other emerging markets as well.

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