The 1994 Mexican Economic Crisis : The Role of Government Expenditure and Relative Prices

Author/Editor:

Eliot Kalter ; Armando P. Ribas

Publication Date:

December 1, 1999

Electronic Access:

Free Full Text (PDF file size is 1962 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper discusses the role of a country’s fiscal stance in weakening the financial underpinnings of an open economy with a quasi-fixed nominal exchange rate, even where the overall fiscal deficit remains unchanged, or even narrows. The paper cites the role of expanding government operations in reducing the relative price of traded goods. A marked increase in government expenditure and taxation is associated with increased production costs, excess demand for nontraded goods, and a deterioration in the financial health of the traded goods sector. The paper demonstrates that, in contrast to the current economic situation in Mexico, the period leading to the 1994 crisis closely parallels these stylized facts.

Series:

Working Paper No. 99/160

Subject:

Frequency:

Annually

English

Publication Date:

December 1, 1999

ISBN/ISSN:

9781451857726/1018-5941

Stock No:

WPIEA1601999

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

23

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