Lecture 16 - International Financial Crisis

Lecture 16 - International Financial Crisis - Inter'l...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Inter’l Financial Crisis International Financial Crisis’ - Sometimes countries that are experiencing the crisis cannot be blamed for the crisis taking place (Contagion Effect), sometimes the country that they are dealing with is to blame Caused by Macroeconomic Imbalances - (debt crisis of the 1980’s) - Many less developed countries were following the “Import Substitution Industrialization” program – these countries had to create large subsidies creating huge government expenditures, with very little revenue - Less developed countries had poor administration (Taxes- those who afford to pay it, didn’t have to because they had an income that was corrupt) - Budget deficits were financed by foreign and money creation, which lead to large foreign debt and inflation, eventually capital flight occurred Caused by Volatile Capital Flows - (Asian crisis in 1997) - Even governments that are following perfect economic policies, this system can be vulnerable What can be done to avoid such problems, like a crisis? (Sections 1-3 are preventative, before you get in a crisis) 1. Moral Hazard - Everyone is accountable for their own mistakes - Banks were creating dilemmas for the economy, investors of industrialized and less developed
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/18/2008 for the course ECONOMICS ECN 220 taught by Professor Jolly during the Winter '08 term at Ryerson.

Page1 / 3

Lecture 16 - International Financial Crisis - Inter'l...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online