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Boom and Bust: Dynamics of Systemic Financial Instability in Financialized Emerging Economies

Julio César Chamorro-Futinico

Published 2025 in Review of Political Economy

ABSTRACT

ABSTRACT This article presented an analytical extension of Minsky's Financial Instability Hypothesis (FIH) to examine boom-and-bust dynamics in Financialized Emerging Economies (FEEs). We argued that Systemic Financial Instability (SFI) in FEEs was not merely endogenous but constituted a structurally subordinate and externally amplified form of the Minskyan cycle. To demonstrate this, we integrated Keynes’s monetary theory of production, which highlighted the role of uncertainty and liquidity preference, with structuralist and regulationist perspectives that characterized the financial subordination of FEEs within the global system. Through a comparative and structured analysis of financial crises in FEEs — including the Mexican Peso Crisis (1994), the Asian Crisis (1997), and the Russian Crisis (1998) — we identified key mechanisms, such as foreign currency-denominated debt, capital flow volatility, and regulatory fragility, that transformed endogenous fragility into systemic crises under the weight of external constraints. Our findings underscored the urgent need for regulatory frameworks that addressed the interaction between internal financial dynamics and the structural constraints of global integration.

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