NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Caused the Asian Currency and Financial Crisis? Part II: The Policy Debate

Giancarlo Corsetti, Paolo Pesenti, Nouriel Roubini

NBER Working Paper No. 6834
Issued in December 1998
NBER Program(s):   IFM

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 if market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe than warranted by the initial weak economic conditions. 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.

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Document Object Identifier (DOI): 10.3386/w6834

Published: (Published as "What Caused the Asian Currency and Financial Crisis?") Japan and the World Economy, Vol. 11 (1999): 305-373.

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