The East Asian Crisis: Macroeconomic Developments and Policy Lessons

55 Pages Posted: 15 Feb 2006

See all articles by Kalpana Kochhar

Kalpana Kochhar

International Monetary Fund (IMF)

Prakash Loungani

International Monetary Fund (IMF)

Mark Stone

International Monetary Fund (IMF)

Date Written: August 1998

Abstract

This paper reviews macroeconomic developments during the first year of the crisis in east Asia and draws some preliminary policy lessons. The crisis is rooted in the interaction of large capital inflows and weak private and public sector governance. At the same time, macroeconomic adjustment in these countries has resulted in some surprising outcomes, including severe economic contractions, low inflation, and rapid external adjustment. The lessons for crisis resolution include the importance of tight monetary policy early on for exchange rate stabilization, flexible fiscal policy, and comprehensive structural reform. Crises are avoided by prudent macroeconomic policies, diligent bank supervision, transparent data dissemination, strong governance, and forward-looking policymaking, even in good times.

Keywords: Asian crisis, interest rates and exchange rates, financial sector restructuring

JEL Classification: O53, F31, F32, G20, G30, E50, E62

Suggested Citation

Kochhar, Kalpana and Loungani, Prakash and Stone, Mark, The East Asian Crisis: Macroeconomic Developments and Policy Lessons (August 1998). IMF Working Paper, Vol. , pp. 1-55, 1998. Available at SSRN: https://ssrn.com/abstract=882680

Kalpana Kochhar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Prakash Loungani

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7043 (Phone)
202-623-4740 (Fax)

Mark Stone

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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