The Balance Sheet Approach to Financial Crises in Emerging Markets

Levy Economics Institute Working Paper No. 485

54 Pages Posted: 14 Dec 2006

See all articles by Jan Toporowski

Jan Toporowski

University of London - School of Oriental and African Studies (SOAS)

Giovanni Cozzi

University of London - School of Oriental and African Studies (SOAS)

Date Written: December 2006

Abstract

This paper contrasts the conventional balance sheet approach to the analysis of economic disturbances in emerging markets with the alternative balance sheet approach that applies and extends Minsky's Financial Instability Hypothesis to (open) emerging market economies. Earlier balance sheet studies are found to be flawed because of a failure to disaggregate firms' balance sheets. Examination of such balance sheets in Thailand, Malaysia, Indonesia, Singapore, and Hong Kong suggests that firms in the three crisis countries did share common causes of financial fragility, but that the level of financial development and the particular domestic economic and political situation also affected their situation.

Keywords: Emerging Markets, Minsky, Financial Crises, Southeast Asia

JEL Classification: O16, O12, F34

Suggested Citation

Toporowski, Jan and Cozzi, Giovanni, The Balance Sheet Approach to Financial Crises in Emerging Markets (December 2006). Levy Economics Institute Working Paper No. 485, Available at SSRN: https://ssrn.com/abstract=951751 or http://dx.doi.org/10.2139/ssrn.951751

Jan Toporowski (Contact Author)

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

Giovanni Cozzi

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

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