Much of the recent literature on the East Asian crisis of 1997-98 has focused on the sudden capital reversals and the accompanying regional bust. An oft ignored fact is that the bust was preceded by a prolonged boom period. This boom was fuelled primarily by large-scale capital inflows...

An important element of the Thai crisis was the sterilisation of reserve outflows by the monetary authorities in an attempt to bailout fragile banks. This paper develops a new second generation currency crisis model to explore the effects of such a policy.