The conventional wisdom is that crises are largely due to swings in short-term capital (mainly bank loans in the case of East Asia). Hence economies that finance their current account deficits mainly via foreign direct investment (FDI) are seen as being less susceptible to a crisis. The spate of...

Increasing capital inflows and sustained interest rate spreads were important features in East Asia prior to the crisis of 1997-98. But why did capital inflows fail to eliminate interest rate differentials? Why were inflows associated with rising domestic interest rates that then perpetuated the...

The 1990s have witnessed three broad periods of severe turbulence in international financial markets. The turmoil in Brazil, East Asia (Indonesia, Malaysia, South Korea, Thailand and the Philippines) and Russia in 1997-99 was preceded by the Mexican-Tequila crisis in 1994-95 and the virtual...