An Introduction to Analytical Issues in Debt
  • 1 0000000404811396 Monetary Fund
  • | 2 0000000404811396 Monetary Fund


IN THE AUTUMN OF 1982 Mexican banks in New York encountered increasing difficulties in meeting their obligations to repay maturing interbank loans. This announcement sent a strong pulse through the delicate web of international financial markets. A liquidity crisis for a debtor as important as Mexico placed the economic viability of other developing countries in doubt as well and threatened to disrupt the trust that a modern credit market operates on. While Federal Reserve officials took the threat very seriously, there were well-known and tested procedures to handle such contingencies. The Fed quickly stepped in to protect the system and provide time to find a more permanent solution.