Analyses of the Asian crisis of 1997 have focused excessively on the financial sector, especially the banks. The role of the real sector in exposing the financial system to stress has been under-emphasized. This paper provides a real-sector explanation for Thailand's crisis, demonstrating the...

This paper models three alternative policy strategies for an open economy and evaluates their performance. In the first regime national monetary policies are used to achieve domestic price stability, without supporting fiscal policy and without concern for external balance. The second regime...