The Asia Crisis Causes, Policy Responses, and Outcomes

Abstract

This paper tells the story of the Asian financial crisis by addressing four questions: What were the causes of the crisis, how did the crisis unfold, what were the policy responses, and what have been the outcomes? The paper takes the view that none of these questions can be understood without appreciating the fundamental vulnerabilities that left authorities without effective tools to counter sudden capital outflows. The pattern of output decline suggests that these vulnerabilities, particularly weaknesses in domestic financial systems, played a larger role than tight monetary policy in determining outcomes.

Keywords: Asia crisis interest rates and exchange rates currency crises balance of payments crises

JEL Classification: O53 F31 F32 F34 G20 E52 E65