There have been several episodes of capital flight in the last quarter-century including capital Flight from Mexico (1994), S.E. Asia-- South Korea, Thailand, and Indonesia (1997), Russia (1998), U.S. (2001), and Argentina (2002). Pick one of these episodes other than Mexico and in a short essay, discuss what caused the capital to flee that country and whether the economic consequences of it were consistent with the predictions of this chapter's model.

Chapters model attached I believe it is between US and Mexico

Capital ight has its largest impact on the country from which capital is eeing, but it also affects other countries. When capital ows out of Mexico into the United States, for instance, it has the opposite effect on the U.S. economy as it has on the Mexican economy. In particular, the rise in Mexican net capital outow coincides With a fall in U.S. net capital outow. As the peso depreciates and Mexican interest rates rise, the dollar appreciates and U.S. interest rates fall. The size of this impact on the U.S. economy is small, however, because the economy of the United States is much larger than that of Mexico. The events that we have been describing in Mexico could happen to any economy in the world, and, in fact, they do from time to time. In 1997, the world learned that the banking systems of several Asian economies, including Thailand, South Korea, and Indonesia, were at or near the point of bankruptcy, and this news induced capital to ee from these nations. In 1998, the Russian government defaulted on its debt, prompting international investors to take whatever money they could and run. A similar (but more complicated) set of events unfolded in Argentina in 2002. In each of these cases of capital ight, the results were much as our model predicts: rising interest rates and a falling currency