Responding to global financial crisis

Governments need to be better prepared to deal with crises by strengthening the financial systems which have been weakened by disruptive short-term portfolio capital flows. Measures such as the limitation of short-term flows via taxation, transparency and reliable information will contribute to stability.

Mexico's liquidity crises was responded to with a 50 billion dollar rescue package for in early 1995.

The Rio Group of 12 Latin American countries recommended, in order to reduce the impact of the economic crises in Russia and Asia, that all emerging economies strengthen themselves through various means, including increasing internal savings and promoting long-term investment.

David D. Hale, Global Chief Economist of Zurich Financial Services, USA, blamed dollar capital flows to Asia for the Asian financial crisis of 1999. These countries assumed that their currencies would be stable but stability did not materialise, he said. Unsound banking, regulatory and corporate governance practices also contributed. Hale however, credited regional governments with appropriate policy responses in dealing with the crisis. Restructuring allowed foreign banks to buy shares in domestic banks and banking rules were improved, particularly in Latin America. If transparency, disclosure, more liberal exchange rate regimes and sound macroeconomic management had been espoused earlier, the crisis would never have happened, he declared.