As indicated in the preceding chapter, the decade of the 1990s was punctuated by a series of financial crises in emerging-market economies. We saw in Chapter 3 that, partly as a result of these crises, significant structural and macroeconomic reforms were undertaken in a large number of emerging and developing economies during the decade of the 1990s. Many of these reforms involved the key areas that we have explored in this book: the institutional underpinnings for the formulation of fiscal policy, the governance of the central bank, the monetary and exchange rate regimes implemented by the bank, policies toward the domestic financial sector, and policies toward the capital account of the balance of payments. These reforms continued to be implemented in many emerging and developing economies during the decade of the 2000s.

After the Argentine crisis of 2001–2002, the world economy entered a five-year period of rapid growth, with low inflation and substantial macroeconomic stability, that proved to be a prosperous time for most emerging and developing countries. However, this time came to an end after 2007 with the outbreak of the Great Recession, a significant slowdown in economic activity among the advanced economies that became especially acute after the failure of the investment bank Lehman Brothers in the United States in September 2008. That event was followed by an international financial crisis more severe than any the world had seen since the Great Depression.