We argue that allowing for the possibility of a self-fulfilling panic helps understand several features of the recent Mexican Crisis. We present a simple model too explain how and why multiple equilibria can occur for some levels of reserves or debt, but not for others.

In this paper we closely exemine the financial events following the Mexican peso devaluation to uncover new lesons about the nature of financial crises.

The remarkable turnaround of the Mexican economy and the evolution of the banking problem is of interest in its own right. In addition, it is of interest to policy makers in other countries where debt-servicing difficulties and foreign exchange crisis have forced adjustment measures. In this...

We present a model of endogenous institutional change that rationalizes reforms that have taken place in the context of economic crisis and drastic political change. Most of these reforms have been initiated by powerholders, even though they have ended worse-off relative to the status quo. The...

We find that in 1995 and 1997 the crisis did not spread in a purely random way. The cross-country variation in the severity of the crisis was largely determined by three fundamentals: the strength of the banking system, the real appreciation, and the international liquidity of the country. We...

The paper discusses the reestablishment of property rights within the firm in Section II. Then it analyzes the elimination of soft budget constraints and bankruptcy reform. Section IV and V discuss restructuring and regulation issues as well as auction design.