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Truth in Advertising and The Great Dollarization Scam

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  • Thomas D. Willett

    (Claremont McKenna College and Claremont Graduate University)

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    Abstract

    Various claims have been made by economist and others as to what caused the Asian crisis, as well as what caused its spread through much of East Asia. Here, we perform some initial testing of four hypotheses, including the dominant role of portfolio investors and hedge funds in initiating and spreading the crisis, moral hazard, and finally the role of Japanese banks in spreading trouble to countries in which they were the largest source of funds. All are found wanting as monocausal explanations, given the evidence we present. We believe that each likely has some weight in a more nuanced analysis, and it is now time to get past such simplistic approaches in order to produce a more complex, synthetic explanation of this episode. We expect that domestic investors moving their funds out of local currency will be an important part of that more complete explanation.

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    File URL: http://www.claremontmckenna.edu/rdschool/papers/2001-05.pdf
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    Bibliographic Info

    Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2001-05.

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    Date of creation: Feb 2001
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    Handle: RePEc:clm:clmeco:2001-05

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    Web page: http://www.claremontmckenna.edu/rdschool/papers/
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    1. Michael P. Dooley & Inseok Shin, 1999. "Private inflows when crises are anticipated: a case study of Korea," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
    2. Ekniti Nitithanprapas & Thomas D. Willett, . "A Currency Crises Model That Works: A Payments Disequilibrium Approach," Claremont Colleges Working Papers 2000-25, Claremont Colleges.
    3. Ricardo Hausmann & Michael Gavin & Carmen Pag├ęs-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
    4. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Thomas D. Willett, 2001. "The OCA Approach to Exchange Rate Regimes: A Perspective on Recent Developments," Claremont Colleges Working Papers 2001-04, Claremont Colleges.
    2. Sven Arndt, 2002. "The Pros and Cons of North American Monetary Integration," Claremont Colleges Working Papers 2002-09, Claremont Colleges.

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