THE ROLE OF FINANCIAL DERIVATIVES IN THE EMERGING MARKET FINANCIAL CRISES OF THE 1990S: A TIME-SERIES CROSS SECTION ANALYSIS

Yıl 2014, Cilt: 28 Sayı: 4, 0 - , 18.11.2014

Ayça Sarıalioğlu Hayali

Öz

Abstract: The 1990s witnessed several remarkable international financial crises around the world, especially in emerging market countries and can be called “the international financial crises and instability era” in the history of political economy. In the financial crisis literature, the potential reasons of these crises have been extensively studied. However, the role of financial derivative instruments as one of the possible key factors in international financial crises of the emerging markets in the 1990s has not been covered fully and not undertaken empirically, especially, by a time-series cross section analysis. So this paper aims to investigate the role and significance of financial derivatives in international financial crises of the emerging market countries in the 1990s, notably the South East Asian Crisis of 1997 and the Brazilian Crisis of 1999, in an analytical manner through a time-series cross section approach. The major findings indicate that financial derivatives, designed to hedge financial risks, have exposed emerging market economies to remarkable risks and financial instabilities in the 1990s and they had role in such crises both directly and indirectly.

Anahtar Kelimeler

international financial crises, financial derivative instruments, time-series cross section analysis

A TIME-SERIES CROSS SECTION ANALYSIS of THE ROLE OF FINANCIAL DERIVATIVES IN THE EMERGING MARKET FINANCIAL CRISES OF THE 1990S

Öz

The 1990s witnessed several remarkable international financial crises around the world, especially in emerging market countries and can be called “the international financial crises and instability era” in the history of political economy. In the financial crisis literature, the potential reasons of these crises have been extensively studied. However, the role of financial derivative instruments as one of the possible key factors in international financial crises of the emerging markets in the 1990s has not been covered fully and not undertaken empirically, especially, by a time-series cross section analysis. So this paper aims to investigate the role and significance of financial derivatives in international financial crises of the emerging market countries in the 1990s, notably the South East Asian Crisis of 1997 and the Brazilian Crisis of 1999, in an analytical manner through a time-series cross section approach. The major findings indicate that financial derivatives, designed to hedge financial risks, have exposed emerging market economies to remarkable risks and financial instabilities in the 1990s and they had role in such crises both directly and indirectly.

Anahtar Kelimeler

uluslararası finansal krizler, finansal türev araçlar, zaman serisi yatay kesit analizi

Kaynakça

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