The Evidence and Impact of Financial Globalization

Chapter 43

Mexican Financial Crisis of 1994–1995

A. Musacchio*,^†

^*Harvard Business School, Boston, MA, USA

^†NBER, Cambridge, MA, USA

Outline

Origins of the Crisis

Trade Liberalization

Liberalization of Capital Flows

The Mexican Peg

The Consequences of Financial Liberalization

Mexico’s Bank Privatization

Investor Enthusiasm

The System under Stress in 1994

Consequences of the 1994 Crisis

Crisis and the US Bailout

What did Mexico Gain in the Long Term?

Glossary

References

Further Reading

The Mexican financial crisis of 1994–95, also known as the ‘Tequila Crisis,’ refers to the crisis that started after Mexico’s devaluation of the peso in December 1994. It precipitated the worst banking crisis in Mexican history (1995–97), the largest depreciation ...