Liberalization, Growth, and Financial Crises: Lessons from Mexico and the Developing World

By now there is widespread agreement that trade liberalization enhances growth. No such agreement exists, however, on the growth-enhancing effects of financial liberalization, in large part because it is associated with risky capital flows, lending booms, and crises. The Mexican experience is often considered a prime example of what can go wrong with liberalization. Mexico liberalized its trade and finance and entered the North American Free Trade Agreement (NAFTA), yet despite these