La crisis financiera global de los noventa bajo la sombra de los derivados financieros

Abstract

The paper aims to analyze the role of financial derivative instruments in the international financial crises of the developing world in the 1990s, such as the South East Asian Crisis in 1997 and the Brazilian crisis in 1999 etc. In this respect, the paper handles the role of financial derivatives in international financial crises, in terms of the direct crisis effect as leading to financial crisis by creating vulnerabilities and triggering the massive and rapid capital outflows and indirect crisis effects as accelerating the crisis by the usage of some specific types of derivatives, such as Total Return Swaps and Put-able Debt etc. Since in the presence of poorly structured and improperly regulated derivatives markets, which developing economies in the 1990s had, derivatives have been open to be used for economically harmful purposes, they were used for taking high risks and escaping from the prudential regulations. It is maintained that although they were initially designed to contribute to the financial stability by virtue of their potential economic benefits such as risk shifting and price discovery, especially in the developing countries, they caused financial instabilities and market failures, as moral hazard and adverse selection, which stem from the asymmetric information problems that can be commonly seen in financial markets and they were widely used for speculative purposes.