Dollar bloc or dollar block: external currency pricing and the East Asian crisis

David Cook and Michael Devereux

No 2004-35, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: This paper provides a quantitative investigation of the East Asian crisis of 1997-99. The two essential features of the crisis that we focus on are a) the crisis was a regional phenomenon; the depth and severity of the crisis was exacerbated by a large decline in regional demand, and b) the practice of setting export goods prices in dollars (which we document empirically) led to a powerful internal propagation effect of the crisis within the region, contributing greatly to the decline in regional trade flows. We construct a model with these two features, and show that it can do a reasonable job of accounting for the response of the main macroeconomic aggregates in Korea, Malaysia, and Thailand during the crisis.

Keywords: Dollar, American; Financial crises - Asia; Prices (search for similar items in EconPapers)
Date: 2004
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Published in Emerging markets and macroeconomic volatility : a conference (2004: June 4-5)

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