Searching for Financial Stability: The Mexican experience since the 1994-95 currency crisis Moritz Cruz

International reserves accumulation has been the policy adopted by emerging economies to achieve financial stability. In this paper, the author estimates the cost of this strategy implemented in Mexico since the 1994-95 peso crisis and an alternative criterion called the maximum sustainable external threshold is introduced, which considers the vulnerability of the balance-of-payments that emanates from both the capital account and the current account. The author also suggests a series of alternative strategies aimed at reaching financial stability, but also aimed at contributing in development-oriented goals.

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