IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

International Economic Policy in the Wake of the Asian Crisis

  • Eichengreen, Barry

The Asian crisis was the third financial crisis of the 1990s. Even more than its predecessors it raised questions about the international community’s approach to crisis prevention and crisis management. It led reservations to be voiced, and not only in Asia, about full and unfettered international capital mobility and about the policy priorities of the International Monetary Fund. This paper discusses the policy challenges posed by the Asian crisis. It starts in Section 1 by reconsidering the controversy over capital mobility. Even before the crisis struck, the IMF was on record as favoring the liberalization of capital flows and had proposed amending its Articles of Agreement to make the promotion of capital account liberalization a purpose of the Fund and to give it jurisdiction over restrictions on capital movements. In the wake of a crisis characterized by volatile financial flows and contagious currency crises, capital mobility is increasingly seen as a mixed blessing. There is a feeling, especially in Asia, that amending the Articles giving the Fund jurisdiction over capital account restrictions would be a bridge too far. The first part of the paper therefore seeks to reconcile the fundamental case for international capital mobility with Asia’s less-than-heartening recent experience. Section 2 draws lessons for country policy. It focuses on the implications for three issues at the heart of the Asian crisis: how to enhance the stability of banking systems, the connections between financial regulation and exchange rate policy, and the efficacy of capital controls. Section 3 turns to the IMF. Here too the questions are well known. Have Fund programs been too restrictive for countries whose problems reflect flaws in their domestic financial systems rather than excessively expansionary monetary and fiscal policies? Should the Fund modify its approach to the liberalization of capital flows? Should it limit itself to the traditional areas of monetary and fiscal policy, or does it need delve more deeply into financial regulation, competition policy, and corporate governance?

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.escholarship.org/uc/item/78c3z577.pdf;origin=repeccitec
Download Restriction: no

Paper provided by Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley in its series Center for International and Development Economics Research, Working Paper Series with number qt78c3z577.

as
in new window

Length:
Date of creation: 01 Aug 1998
Date of revision:
Handle: RePEc:cdl:ciders:qt78c3z577
Contact details of provider: Postal: F502 Haas, Berkeley CA 94720-1922
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_cider/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Caprio, Gerard Jr. & Dooley, Michael & Leipziger, Danny & Walsh, Carl, 1996. "The lender of last resort function under a currency board : the case of Argentina," Policy Research Working Paper Series 1648, The World Bank.
  2. Frederic S. Mishkin, 1999. "International Capital Movements, Financial Volatility and Financial Instability," NBER Working Papers 6390, National Bureau of Economic Research, Inc.
  3. Michael D. Bordo & Barry Eichengreen, 1997. "Implications of the Great Depression for the Development of the International Monetary System," NBER Working Papers 5883, National Bureau of Economic Research, Inc.
  4. Sebastian Edwards, 2000. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 197-246 National Bureau of Economic Research, Inc.
  5. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  6. Vittorio Grilli & Gian Maria Milesi-Ferretti, 1995. "Economic Effects and Structural Determinants of Capital Controls," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 517-551, September.
  7. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  8. Michael Gavin & Ricardo Hausmann, 1997. "Make or Buy? Approaches to Financial Market Integration," Research Department Publications 4052, Inter-American Development Bank, Research Department.
  9. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May.
  10. George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
  11. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
  12. repec:fth:wobaco:1083 is not listed on IDEAS
  13. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
  14. Barry J. Eichengreen & Inci Ötker & A. Javier Hamann & Esteban Jadresic & R. B. Johnston & Hugh Bredenkamp & Paul R. Masson, 1998. "Exit Strategies; Policy Options for Countries Seeking Exchange Rate Flexibility," IMF Occasional Papers 168, International Monetary Fund.
  15. Chinn, Menzie D., 2000. "Before the fall: were East Asian currencies overvalued?," Emerging Markets Review, Elsevier, vol. 1(2), pages 101-126, September.
  16. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
  17. Liliana Rojas-Suárez & Donald J. Mathieson, 1993. "Liberalization of the Capital Account; Experiences and Issues," IMF Occasional Papers 103, International Monetary Fund.
  18. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
  19. Summers, L-H & Cline, W-R & Eichengreen, B & Portes, R & Fraga, A & Goldstein, M, 1996. "From Halifax to Lyons : What Has Been Done About Crisis Management?," Princeton Studies in International Economics 200, International Economics Section, Departement of Economics Princeton University,.
  20. Alesina, Alberto F & Grilli, Vittorio & Milesi-Ferretti, Gian Maria, 1993. "The Political Economy of Capital Controls," CEPR Discussion Papers 793, C.E.P.R. Discussion Papers.
  21. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  22. Dooley, Michael P, 1996. "Capital Controls and Emerging Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 197-205, July.
  23. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  24. Garber, Peter M, 1996. "Managing Risks to Financial Markets from Volatile Capital Flows: The Role of Prudential Regulation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 183-95, July.
  25. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  26. Barry Eichengreen & Richard Portes, 1997. "Managing financial crises in emerging markets," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 193-225.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cdl:ciders:qt78c3z577. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.