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PKSG Working Paper Series

Working Paper PKWP1110

Financial fragility and neoliberalism in developing countries

December 2011

Andrés Blancas

The aim of this paper is to show the financial fragility dynamics in developing countries following the last theoretical advances. As an empirical application we prove that the Mexican economy has been characterized by financial fragility, mainly during the crisis terms. Financial fragility has created difficult problems for policy makers; in trying to fix it by restricted monetary and fiscal policies, they have triggered the generalized financial crises. Whereby, financial fragility can be diagnosed as an structural problem of developing countries like Mexico and a real potential risk of generalized economic crisis in the process of economic liberalization nowadays.

Keywords: Economic dynamics, financial fragility, developing countries, financial crisis, monetary policy and Mexican economy

JEL classification: C61: Optimization Techniques; Programming Models; Dynamic Analysis E44: Financial Markets and the Macroeconomy E58: Central Banks and Their Policies F34: International Lending and Debt Problems O50: Economywide Country Studies: General

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