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The impact on the emerging economies on the 1990’s with the onset of liberalization had similar effects. A high level of interest rates and a pegged exchange rate lured foreign investment in Latin America, east of Asia and Russia. The result was very optimistic about the stock market booming and financing of countries’ deficit accounts. However, during recent years there was a reversal in the situations. Subsequently, a massive volume of wealth was flown out of the country. The economies were compelled to get rid of the pegged exchange rate system and float their currencies. In some cases like Brazil and Russia financial imbalances worsened the situation. Even a small change in foreign capital index result in a large swing in capital inflow and result the economy enter the vicious circle.