Roque Fernandez has provided an illuminating and provocative view of the causes of, and potential solutions to, financial crises, both internal and external, in less developed countries (LDCs). His key point, as I understand it, is that unless the value of the financial claims in an economy can and are allowed to adjust to changes in the (present) value of real assets, the system will explode. Although he makes his argument in the context of the bank failures experienced in Argentina during 1984, it is a much broader one that deserves greater recognition and deeper treatment in analyses of LDC finances.
KeywordsReal Interest Rate Monetary Authority Foreign Exchange Market Bank Failure Real Asset
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