In this class we have studied different kinds of financial crises.
a. First and second generation crises attempt to explain the determinants of currency crises. Explain what a currency crisis is, briefly. What is the key difference in the explanation of a currency crisis between the first and a second generation theories? Provide an historical example for a crisis that economists think exemplifies the second generation crisis theory. What is one policy that could have been taken to avoid the currency crash? Was this policy taken? Why not?
b. The third generation financial crisis theory incorporates yet more elements. Explain how a third generation currency crisis theory is different from a first generation crisis and a second generation crisis? How is it similar to a second generation crisis?
c. Explain carefully how a sudden stop in capital flows matters for investment and imports in an economy. Give two policies or actions a less developed economy could take to limit the damage from a sudden stops of capital inflows.
d. Some economists believe a big sudden stop of capital flows occurred in the early 1980s. In what context did this sudden stop occur? What do you think caused capital to stop flowing? What was the implication of the sudden stop for economic stability, growth and financial stability for the countries involved in this sudden stop?
Sample Solution
Eudragit S100 is insoluble in acidic medium and dissolves above neutral pH. Dissolution occurs as a result of structural change of the polymer associated with ionization of the carboxylic functional group. At acidic pH, Eudragit S100 particles posses low permeability because of hydrogen bonding between the hydroxyl group of carboxylic moiety and the carbonyl oxygen of the ester group in the polymer molecules. This bonding increase degree of compactness of the polymer and decrease its porosity and permeability [130], minimizing release of an encapsulating agent. When the pH of aqueous medium is increased, Eudragit S100 start to dissolve as carboxylic functional groups ionizes. The reported theoretical dissolution threshold is pH 7.0 and pKa of polymer molecules is believed to be approximately 6 [131]. Moreover, swelling of Eudragit S100 matrix may accompany the dissolution process contributing to release. It is believed that Eudragit S swells at pH above 6.5 [132]. Therefore, release of active substance may be due to the combination of swelling and dissolution. Hydroxyl propyl methyl cellulose phthalate (HPMCP): These are natural cellulose synthetically modified to produce partly methyl ethers, 2-hydroxy propyl ethers and phthalyl esters. HPMCP is manufactured by esterification of hypromellose with phthalic anhydride. The level of alkyloxy and carboxybenzoyl substitutions determines the properties of polymer and in particular the pH at which it dissolves in aqueous medium. HPMCP (also known as Hypromellose phthalate) [133] is commonly used in oral pharmaceutical formulations as an enteric coating material for tablets or granules [134-138]. Hypromellose phthalate is insoluble in gastric fluid, but will swell and dissolve speedily in the upper intestine. These polymers can be used as coating agents because they do not necessitate the addition of plasticizer or other film formers to fabricate coatings for oral formulations [128]. Hydroxypropyl methylcellulose phthalate (HPMCP), available in the market since 1971, it is a >
Eudragit S100 is insoluble in acidic medium and dissolves above neutral pH. Dissolution occurs as a result of structural change of the polymer associated with ionization of the carboxylic functional group. At acidic pH, Eudragit S100 particles posses low permeability because of hydrogen bonding between the hydroxyl group of carboxylic moiety and the carbonyl oxygen of the ester group in the polymer molecules. This bonding increase degree of compactness of the polymer and decrease its porosity and permeability [130], minimizing release of an encapsulating agent. When the pH of aqueous medium is increased, Eudragit S100 start to dissolve as carboxylic functional groups ionizes. The reported theoretical dissolution threshold is pH 7.0 and pKa of polymer molecules is believed to be approximately 6 [131]. Moreover, swelling of Eudragit S100 matrix may accompany the dissolution process contributing to release. It is believed that Eudragit S swells at pH above 6.5 [132]. Therefore, release of active substance may be due to the combination of swelling and dissolution. Hydroxyl propyl methyl cellulose phthalate (HPMCP): These are natural cellulose synthetically modified to produce partly methyl ethers, 2-hydroxy propyl ethers and phthalyl esters. HPMCP is manufactured by esterification of hypromellose with phthalic anhydride. The level of alkyloxy and carboxybenzoyl substitutions determines the properties of polymer and in particular the pH at which it dissolves in aqueous medium. HPMCP (also known as Hypromellose phthalate) [133] is commonly used in oral pharmaceutical formulations as an enteric coating material for tablets or granules [134-138]. Hypromellose phthalate is insoluble in gastric fluid, but will swell and dissolve speedily in the upper intestine. These polymers can be used as coating agents because they do not necessitate the addition of plasticizer or other film formers to fabricate coatings for oral formulations [128]. Hydroxypropyl methylcellulose phthalate (HPMCP), available in the market since 1971, it is a >
