Late 1990s and early 2000s: Russian financial crisis, Brazilian financial crisis, Argentine crisis
The world became more closely intertwined in the late 1990s and beyond, as production processes and finance became increasingly global. However, the global institutional infrastructure did not change dramatically, and financial contagion followed on the heels of foreign indebtedness and declining economic conditions.
Several crises followed the Asian financial crisis in rapid succession. These were impacted by contagion from the Asian crisis and from one another to different degrees. A loss of foreign investor confidence added fuel to the fire in these countries, which were overindebted to foreign investors to begin with. The Russian financial crisis began in 1998, and was caused by serious vulnerabilities associated with economic restructuring due to the privatization process. The Brazilian financial crisis also began in 1998 and was less serious than the Russian crisis, brought about by overspending during its privatization process. The Argentine financial crisis was the least expected, since Argentina had been working closely with the International Monetary Fund (IMF) to prevent crisis. The crisis began in 2000 as Argentina became increasingly indebted and descended into recession. The country was unable to use monetary policy to revive its economy, and its fiscal policy suffered from structural shortcomings. We examine each of these crises in turn, starting with the Russian financial crisis.