The Mexican Crisis of 1994 5 was the first financial crisis that spilled over into the real
sector. This thesis explores three unconventional research strands. The first is the assessment
of the Mexican trade structure to evaluate possible impulses from the real to the monetary
sector which can be discarded. However a structural weakness an export structure based
largely on pre-imported inputs (and oil) contributes significantly to current account deficits.
The second is the triggering role of domestic investors and not foreign capitals in the
financial stampede that elicited the crisis. The last strand highlights the role of OTC
financial derivatives and the thereof resulting synthetic capital flows which reached in
Mexico 4.9% of GDP in 1994. These transactions were crucial to underpin currency appreciation
to the development of a credit boom and external imbalances and finally determined the
emergence of the crisis.
