Abstract

The Mexican crisis of 1994–95 was associated with a rescue package of unprecedented size. Yet, bailout package notwithstanding, Mexico suffered its largest one-year output decline in 1995, as GDP shrank by more than 6 percent. Since Mexico’s crisis, international organizations have brokered several more rescue plans involving vast sums of funds. Yet, as in Mexico, all the recipients of this financing have had to undertake drastic adjustment as private capital flows dried up. Furthermore, these countries have had to cope with severe recessions. Hence, if we are to assess whether the balance has tilted in recent years toward adjustment, despite the larger bailout packages from the international community, we must begin by comparing the severity of recent crises with their earlier counterparts. In what follows, we aim to assess the burden of adjustment by considering alternative ways of measuring the severity of crises.