It is by now common knowledge that there can be a significant divergence in the de facto versus de jure exchange rate regimes operated by economies. Although much of the recent published literature in Asia has focused on the crisis-hit economies, Korea and Thailand in particular, scant attention...

This paper develops a simple model to examine the reasons behind the capital inflow surges into selected Asian economies in the 1990s prior to the financial crisis of 1997-98. The analytical model shows that persistent uncovered interest differentials and consequent capital inflows may be a...