Case study: THP in International Finance

 

 

Author: Luigi Ventimiglia (QMUL)

 

 

Analytical Assessment Brief

 

Assessment Title: Currency Crises, Theory, and Historical Interpretation in International Finance

 

Introduction

This assessment is designed according to a Teaching with Historical Perspectives (THP) approach and an AI-robust assessment logic.

Rather than asking students simply to reproduce definitions or apply theoretical models mechanically, the task requires students to understand that economic theories are themselves historical products: they emerge in specific periods because economists attempt to explain particular problems made visible by concrete historical events.

In this sense, the assessment does not treat theory as a neutral toolbox available outside history. Instead, students are expected to show that theories belong to history too: each framework reflects the institutional conditions, policy debates, and crises that gave rise to it.

For example, theories of currency crises developed across different historical moments because successive episodes of international instability revealed mechanisms that earlier theories could not fully explain. First-generation models emerged in contexts where reserve depletion and fiscal inconsistency appeared central; later approaches incorporated expectations, credibility, balance-sheet fragility, financial liberalisation, and international monetary asymmetries.

Understanding why theories change therefore becomes part of understanding the economic problem itself.

A strong answer will therefore demonstrate not only knowledge of competing frameworks, but also the ability to situate those frameworks historically and critically.

 

Main Question

Choose ONE country and ONE major currency crisis (or external financial crisis) affecting that country.

Examples may include:

• Argentina 2001
• Mexico 1994
• Thailand 1997
• Indonesia 1997–98
• South Korea 1997
• Brazil 1999
• Russia 1998
• Turkey 2001
• Turkey 2018
• United Kingdom 1992
• Iceland 2008
• Greece 2010
• Lebanon 2019
• Sri Lanka 2022

This list is not exhaustive. Students may choose another relevant case, provided it allows sufficient theoretical and empirical analysis.

 

Explain how theories of currency crises and external financial instability have evolved across major theoretical traditions, showing how different historical periods generated different analytical explanations of crisis.

Your answer must use compulsory module readings and demonstrate that theories emerged in response to historically specific episodes of instability.

Discuss how different theoretical traditions define crisis mechanisms, which causal factors they privilege, and how these choices shape both interpretation of evidence and policy responses.

For your chosen country, present institutional evidence on the selected crisis and show how different theoretical approaches generate different readings of the same event.

 

Your answer must address the following dimensions

1. Historical reconstruction of the crisis

Explain:

• domestic economic conditions;
• exchange-rate regime;
• capital flow dynamics;
• external vulnerability;
• international environment.

 

2. Historical evolution of theory

Explain why different crisis theories emerged historically.

For example:

• first-generation models;
• second-generation models;
• third-generation / balance-sheet approaches;
• structuralist interpretations;
• Post-Keynesian approaches;
• currency hierarchy perspectives.

Students must explain not only what each theory argues, but also why that theory became historically necessary.

 

3. Comparative interpretation

Students must use at least two theoretical approaches to interpret the selected crisis.

These theories may be discussed:

• as alternative explanations, showing how each framework identifies different causal mechanisms;

or

• as complementary perspectives, showing how combining approaches may produce a richer interpretation of the crisis.

The analysis must explain clearly:

• what each theory highlights;
• what each theory leaves unexplained;
• whether one framework is more convincing for the chosen case;
• whether combining theories improves explanatory power.

For example, students may compare:

• first-generation vs second-generation models;
• balance-sheet approaches vs structuralist interpretations;
• orthodox vs Post-Keynesian perspectives;
• crisis models vs currency hierarchy approaches.

A strong answer will show that theoretical comparison is not simply descriptive, but analytical: theories must be used to interpret the same historical evidence and generate different readings of the crisis.

 

4. Policy implications

Explain how policy recommendations change depending on the theory used.

For example:

• reserve defence;
• devaluation;
• fiscal adjustment;
• capital controls;
• industrial policy;
• international coordination.

 

Evidence Requirements

Students must use:

• institutional data;
• central bank data;
• International Monetary Fund/ World Bank / Bank for International Settlements / Organisation for Economic Co-operation and Development / United Nations Conference on Trade and Development where relevant;
• historical evidence appropriate to the chosen crisis.

Graphs and tables must be clearly referenced.

 

Final Report (2,000 words)

The report should develop a clear analytical structure. A possible organisation is:

• Introduction
• Historical context of the crisis
• Evolution of theories
• Comparative interpretation
• Policy discussion
• Conclusion

Figures and tables are not included in the word count

 

Individual Analytical Contribution

Each student must include a short individual paragraph (approximately 150 words, additional to the main word count) explaining:

• their own analytical contribution to the group work;
• the specific role they played in developing the case study;
• the part of the interpretation or evidence for which they were primarily responsible.

This paragraph should make clear how the student contributed intellectually to the collective work.

 

Viva Validation

Following submission, students will complete a short viva discussion.

The viva is designed to validate the written submission and confirm individual ownership of the analysis.

Students may be asked to explain:

• the selected crisis;
• the theoretical choices made;
• the interpretation of evidence;
• the limits of the analytical framework adopted.

The viva therefore contributes to confirming the final mark by ensuring that the written work reflects genuine understanding.