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The Asian Crises Reexamined

Author

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  • Thomas D. Willett

    (Horton Professor of Economics Claremont Graduate University and Claremont McKenna College Director, Claremont Institute for Economic Policy Studies The Claremont Colleges Claremont, CA 91711 USA)

  • Ekniti Nitithanprapas

    (Senior Advisor to Executive Director World Bank)

  • Isriya Nitithanprapas

    (Policy and Planning Analyst National Economic & Social Development Board Thailand)

  • Sunil Rongala

    (Visiting Scholar Freeman Program in Asian Political Economy The Claremont Colleges Claremont, CA 91711 USA)

Abstract

This paper analyzes hypotheses and evidence for the causes of the Asian crises. It presents new evidence that, along with high rates of credit expansion and low ratios of international reserves to short-term debt, the combination of substantially appreciated currencies and large current account deficits played an important role in the crises' severity. Furthermore, the paper concludes that pre-crisis over-optimism rather than panic caused financial markets to behave imperfectly and that perverse financial liberalization and limited flexibility of exchange rates generated moral hazard problems of more importance than those generated by prospects of international bailouts. Copyright (c) 2005 Center for International Development and the Massachusetts Institute of Technology.

Suggested Citation

  • Thomas D. Willett & Ekniti Nitithanprapas & Isriya Nitithanprapas & Sunil Rongala, 2004. "The Asian Crises Reexamined," Asian Economic Papers, MIT Press, vol. 3(3), pages 32-87.
    • Handle: RePEc:tpr:asiaec:v:3:y:2004:i:3:p:32-87
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    2. Li, Jie & Rajan, Ramkishen S., 2006. "Can High Reserves Offset Weak Fundamentals? A Simple Model of Precautionary Demand for Reserves," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(3), pages 317-328.
    3. Mohammad Karimi & Marcel Voia, 2015. "Identifying extreme values of exchange market pressure," Empirical Economics, Springer, vol. 48(3), pages 1055-1078, May.
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    5. Jie Li, 2007. "Examining the interactions of high reserves and weak fundamentals in currency crises," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 617-621.
    6. Puspa D. Amri & Thomas D. Willett, 2017. "Policy Inconsistencies and the Political Economy of Currency Crises," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-24, February.

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