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Global Financial Instability: Framework, Events, Issues

Global Financial Instability: Framework, Events, Issues —Volume 13, Number 4 —Fall 1999 —Pages 3–20 n the last five years, the global economy has experienced severe bouts of financial instability that have had devastating impacts on crisis countries. Some examples of the impact on GDP are given in Table 1. In Mexico, GDP growth fell from above 4 percent in 1994 before the crisis to 6 percent in 1995. In Thailand, Malaysia, South Korea and Indonesia, GDP growth fell from above 5 percent in 1996 before the crisis to below 5 percent in 1998. These swings of over 10 percent in rates of GDP growth are of the same order of magnitude as what occurred in the United States during the Great Depression. Two of the key questions facing policymakers today are how to reduce the risk of global financial instability and how to cope with it when it occurs. This paper starts by defining financial instability and then showing how it harms economic activity. It then uses this framework to describe what happened during the recent financial crises in Mexico and east Asia. The paper ends by raising several key policy issues; not coincidentally, these issues are addressed in the remaining papers in the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

Global Financial Instability: Framework, Events, Issues

Mishkin, Frederic S
Journal of Economic Perspectives , Volume 13 (4) – Nov 1, 1999
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References (32)

Publisher
American Economic Association
Copyright
Copyright © 1999 by the American Economic Association
Subject
Symposium
ISSN
0895-3309
DOI
10.1257/jep.13.4.3
Publisher site
See Article on Publisher Site

Abstract

—Volume 13, Number 4 —Fall 1999 —Pages 3–20 n the last five years, the global economy has experienced severe bouts of financial instability that have had devastating impacts on crisis countries. Some examples of the impact on GDP are given in Table 1. In Mexico, GDP growth fell from above 4 percent in 1994 before the crisis to 6 percent in 1995. In Thailand, Malaysia, South Korea and Indonesia, GDP growth fell from above 5 percent in 1996 before the crisis to below 5 percent in 1998. These swings of over 10 percent in rates of GDP growth are of the same order of magnitude as what occurred in the United States during the Great Depression. Two of the key questions facing policymakers today are how to reduce the risk of global financial instability and how to cope with it when it occurs. This paper starts by defining financial instability and then showing how it harms economic activity. It then uses this framework to describe what happened during the recent financial crises in Mexico and east Asia. The paper ends by raising several key policy issues; not coincidentally, these issues are addressed in the remaining papers in the

Journal

Journal of Economic Perspectives – American Economic Association

Published: Nov 1, 1999

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