The Asian crisis and macroeconomic development: the impact of ambiguity

The purpose of this paper is to provide a coherent framework in which the main characteristics of growth, uncertainty and crisis are connected. Within this framework, we find that these issues, which were so prominent in East Asia, are consequences of the chosen development strategy. Thus, we identify a fundamental mechanism that relates the high levels of per capita growth in the East Asian countries before the crisis, its fall during the crisis and the more modest growth rates thereafter. We address the question whether or not crises can be prevented in the process of economic development and, if so, whether it is desirable to do so.