Fourth Quarter 2001
Federal Reserve Bank of Dallas

Economic and Financial Review was published from 1999 until 2001.

The Engine of Capitalist Process: Entrepreneurs in Economic Theory
Robert L. Formaini

Market economies rely on entrepreneurs as their driving force. In this article, Robert Formaini examines why entrepreneurs are important for us today. He traces the history of the concept of entrepreneurship in economic theory, showing how the concept's popularity has varied greatly since its first use. Formaini seeks to examine the concept's development as one of the key explanatory variables for profit, economic growth, and income differentials. Finally, he investigates the policy implications of adopting different views of entrepreneurs.

Banking and Currency Crisis Recovery: Brazil's Turnaround of 1999
William C. Gruben and John H. Welch

Of the many countries that suffered exchange rate crises in the 1990s, Brazil and Korea recovered most rapidly. This article analyzes the Brazilian recovery. William Gruben and John Welch focus on the freedom that Brazilian bank health gave to the central bank to pursue a postcrisis monetary policy that would settle markets, reestablish price stability, and encourage investment and the return of foreign capital. Brazilian bank health was not an accident; it reflected not only bank responses to precrisis changes in government regulations, but also to large precrisis interest rate increases associated in part with Brazil's efforts to defend its currency.

Recovery from a Financial Crisis: The Case of South Korea
Jahyeong Koo and Sherry L. Kiser

Among the countries that were impacted by the 1997 Asian crisis, South Korea (Korea hereafter) has demonstrated the fastest recovery by blocking its downward spiral. Jahyeong Koo and Sherry Kiser examine the recovery process of financial crises, particularly in Korea, in light of the weak-fundamentals and financial-panic views. Since neither of these views adequately explains Korea's recovery, the authors look at other phenomena for an explanation. Alternative financial arrangements and labor market adjustments are specifically examined. The authors acknowledge that Korea's recovery was only possible after it gained control of its exchange-rate crisis. Since the recovery process affirms neither the weak-fundamentals view nor the financial-panic view, Koo and Kiser conclude that containing the downward spiral was a combination of factors working together and that much of Korea's recovery can be attributed to the creation of alternative funding sources and labor adjustments.