MEXICAN CURRENCY CRISIS: OVERVIEW AND LESSONS

Economic theory did not encounter specific definition about currency crisis that is acceptable as universal. However, when we think about currency crisis the first thing we recall is a massive escape of investors from the currency for which they fear will depreciate thus affecting that this devaluation to really happen at a more financial repressive dimension than usual. In such a situation currency loses its stability and confidence, and if there are no sufficient international reserves then this can result in serious financial crisis. The aim of the paper is underling the utilization of theoretical knowledge about currency crises and focusing on the evaluation of existing theoretical models, over the last fifteen years, which were developed different theoretical models of currency crises in order to explain disruptions in the financial system or collapse of the exchange rate. Also, here we determinate the reasons and implications of a currency crisis, as the crucial role of the foreign exchange reserve for a country and behavior of investor in such a circumstances.