What Caused the Asian Currency and Financial Crisis?

Giancarlo Corsetti, Paolo Pesenti and Nouriel Roubini
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Nouriel Roubini: New York University, CEPR and NBER

No 343, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even though market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than was warranted by the initial weak economic conditions. The first part of the paper provides an overview of economic fundamentals in Asia on the eve of the crisis, with emphasis on current account imbalances, quantity and quality of financial ‘overlending’, banking problems, and the composition, maturity and size of capital inflows. The second part of the paper presents a reconstruction of the Asian meltdown — from the antecedents in 1995-96 to the recent developments in the summer of 1998 — in parallel with a survey of the debate on the strategies to recover from the crisis, the role of international intervention, and the costs and benefits of capital controls.

Keywords: financial crisis; asia; currency (search for similar items in EconPapers)
JEL-codes: F31 F33 F34 F36 G15 G18 (search for similar items in EconPapers)
Date: 1998-12
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Citations: View citations in EconPapers (286)

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Related works:
Journal Article: What caused the Asian currency and financial crisis? (1999)
Working Paper: What Caused the Asian Currency and Financial Crisis? (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_343_98

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