Possible Causes of Financial Crises in Emerging Economies: An Empirical Study of Argentina

Abstract

Financial crises are a global phenomenon, usually associated with significant and persistent declines in economic output, investment, and productivity. The recurring nature of financial crises with the uniqueness of each event makes policy making more complex. In all these traumatic events, macroeconomic fundamentals were severely affected due to institutional and structural weaknesses. In the early 1990s, the world witnessed a series of financial and economic crises mainly affecting the economies of emerging countries, In particular Argentina.

We conducted a standard study using the Auto-Regressive Distributed Lag model for a set of possible macro indicators explaining the 2001 Argentina crisis and its impact on economic growth, based on annual data covering the period from 1980 to 2009. The results indicate that there is a short-term relationship between the variables of the study, we also found a negative impact of all the explanatory variables on economic growth, and this proves the validity of the study.