460_The Mexican crisis and the Asian crisis

460_The Mexican crisis and the Asian crisis - The Mexican...

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The Mexican crisis and the Asian crisis
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CHAPTER 12 The Open Economy CASE STUDY: The Mexican peso crisis 10 15 20 25 30 35 7/10/94 8/29/94 10/18/94 12/7/94 1/26/95 3/17/95 5/6/95 U.S. Cents per Mexican Peso
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CHAPTER 12 The Open Economy 10 15 20 25 30 35 7/10/94 8/29/94 10/18/94 12/7/94 1/26/95 3/17/95 5/6/95 U.S. Cents per Mexican Peso CASE STUDY: The Mexican peso crisis
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CHAPTER 12 The Open Economy The Peso crisis didn’t just hurt Mexico U.S. goods more expensive to Mexicans U.S. firms lost revenue Hundreds of bankruptcies along U.S.-Mexican border Mexican assets worth less in dollars Reduced wealth of millions of U.S. citizens
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The Open Economy Understanding the crisis In the early 1990s, Mexico was an attractive place for foreign investment. During 1994, political developments caused an increase in Mexico’s risk premium ( θ ): peasant uprising in Chiapas assassination of leading presidential candidate Another factor: The Federal Reserve raised U.S. interest rates several times during 1994 to prevent U.S. inflation. ( r
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460_The Mexican crisis and the Asian crisis - The Mexican...

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