Several recent studies have examined the tendency of regions within a nation to exhibit long-term convergence in per capita income levels. Barro and Sala-i-Martin (1991, 1992, 1995) have found a tendency towards convergence among the U.S. states, among Japanese prefectures, and among regions...

We argue that allowing for the possibility of a self-fulfilling panic helps understand several features of the recent Mexican crisis. Self-fulfilling expectations became decisive in generating a panic only after the government ran down gross reserves and ran up short-term dollar debt. We present...

We argue that allowing for the possibility of a self-fulfilling panic helps understand several features of the recent Mexican Crisis. We present a simple model too explain how and why multiple equilibria can occur for some levels of reserves or debt, but not for others.

In this paper we closely exemine the financial events following the Mexican peso devaluation to uncover new lesons about the nature of financial crises.