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'Contrast the main features of the Asian debt crisis of late 1990s with Latin American debt crisis of the early 1980s'- essay topic number 2. Introduction International debt crises have a history nearly as long as international debt is flowing. The Latin American and Asian debt crises occurred just as principal-agent theory based on asymmetric information. An asymmetric information model of the credit market means that borrowers may have informational advantages over lenders.Lenders' optimal response is to rationing credit and to using signalling mechanisms to screen borrowers to avoid moral hazard in the future. The Latin American debt crisis refers to a period in the early 1980s often known in literature as the "lost decade". It led to the situation where country's foreign debt exceeded their earnings power and they were not able to repay it. In the 70s many Latin American countries (Brazil, Argentina, and Mexico) borrowed huge...

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