Working Paper: CEPR ID: DP10705
Authors: Carmen M. Reinhart
Abstract: Some of the best-known papers of Carlos F. Díaz Alejandro were about Latin America?s crises in the 1980s and 1930s. I will show data, figures and evidence here about the crises in the advanced economies 30 years later that fit the same narrative. His unadulterated words aptly describe modern problems across geographical borders and, in this case, income levels. This attests to his timeless insight and understanding. Because some of the observations he made have general applicability to the study of recurring patterns across crises, I have taken the liberty to label these as lessons. These are primarily lessons about what to avoid.
Keywords: No keywords provided
JEL Codes: B26; E5; E6; F3; G01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| domestic moral hazard problems (H84) | increased risk-taking behavior among financial institutions (G21) |
| government interventions (H53) | expectations of bailouts (G28) |
| expectations of bailouts (G28) | exacerbation of risk-taking (D91) |
| external moral hazard problems (D82) | foreign investors' behavior (F23) |
| expectations of government intervention (H10) | buildup of private debts (F65) |
| neglect of prudential regulations (G28) | worsened moral hazard problems (H84) |
| worsened moral hazard problems (H84) | excessive risk-taking (G41) |
| financial deregulation (G28) | 'too big to fail' phenomenon (F65) |
| 'too big to fail' phenomenon (F65) | riskier behaviors of large institutions (G21) |