The key factor leading to the financial crises in Mexico and the East Asian countries was
A)a deterioration in banks' balance sheets because of increasing loan losses.
B)severe fiscal imbalances.
C)a sharp increase in the stock market.
D)a sharp decline in interest rates.

Question

Quizplus · Accepted Answer

The financial crises in Mexico and the East Asian countries were primarily caused by a deterioration in banks' balance sheets due to increasing loan losses. In Mexico, weak lending standards and overborrowing by corporations contributed to high levels of non-performing loans, which led to a banking crisis. In East Asian countries, excessive lending by banks to real estate and construction sectors, and the reliance on short-term foreign borrowing, resulted in a boom-bust cycle that eventually led to a financial crisis.

The Key Factor Leading to the Financial Crises in Mexico