In mid-1994, Rudiger Dornbusch and Alejandro Werner warned that Mexico was heading into a crisis.
Few academic papers have been so prescient.
Not only was there a crisis later that year, but it followed the playbook that the paper outlined.
The late Professor Dornbusch and Mr Werner (now a senior official at the International Monetary Fund, or IMF) were worried on three counts.
The exchange rate was substantially overvalued, economic growth had stalled, and the financial system was under stress. A loss of confidence, they warned, would lead to a sharp depreciation of the exchange rate, a collapse of foreign funding, and a seizure of the banking system.
Together, these would cause a severe contraction in output.
Image: Protestors seen on the streets on Mexico in 1994. Inset: Alejandro Werner.
Text: Ashoka Mody and Michael Walton, Business Standard
Ashoka Mody teaches at the Woodrow Wilson School, Princeton University. Michael Walton teaches at the Kennedy School, Harvard University, and is a visiting fellow at the Centre for Policy Research.