Trade Integration as a Mechanism of Financial Crisis Prevention

We have created an eclectic model that synthesizes the different versions of the third generation exchange rate crises models. This eclectic model takes current existing schemes beyond the traditional analyses—based on causes and consequences of external financial crises in emerging markets—and raises trade openness as an effective mechanism to prevent and avoid foreign debt crises and exchange rate crises. Our findings give theoretical support to empirical economic literature about this topic because, at the present time, most of the studies connecting international trade and financial crises are basically empirical.