ABSTRACT
Mexico was the first of the emerging economies to suffer financial crisis in the 1990s. The main cause of this crisis was domestic policy, although the increase in United States interest rates early in 1994 and political assassinations undermined confidence. These were, however, triggers rather than fundamental problems. Mexico was lucky that at the time there was no international contagion (as there was in 1997 from East Asia) and that the United States economy was growing robustly. That domestic policies were fundamental to both the crisis and recovery was amply demonstrated in the following years when Mexico showed stronger economic performance and managed relatively well during strong international contagion from East Asia in 1997, Russia in 1998 and Brazil in 1999. Such good performance is explained by a set of domestic policies that minimises macroeconomic imbalances and vulnerability.
