IDEAS home Printed from
   My bibliography  Save this paper

Rethinking vulnerability to currency crises: Comments on Athukorala and Warr


  • Ross H McLeod



This paper re-examines Athukorala and Warr's ex post investigation of several Asian countries' vulnerability to balance of payments crises. It argues that their focus on 'mobile capital' is flawed in two important aspects. It also questions their ideas about exchange rate 'overvaluation', and argues that their case that this is a meaningful indicator of vulnerability is unconvincing. The finding that rapid finance sector growth seems to have been a precursor to crisis is followed up with a discussion of the policy implications, which was largely absent from the original article. The paper goes on to question the logic of the authors' finding that the crises were not caused by irrational private sector behaviour. Finally, it suggests that government policy often implicitly assumes the prevalence of such behaviour, and that vulnerability to crises results from policy that prevents continuous adjustment of the real exchange rate to changing circumstances.

Suggested Citation

  • Ross H McLeod, 2003. "Rethinking vulnerability to currency crises: Comments on Athukorala and Warr," Departmental Working Papers 2003-11, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2003-11

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Ross McLeod, 2000. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(2), pages 5-41.
    2. Prema‐chandra Athukorala & Peter G. Warr, 2002. "Vulnerability to a Currency Crisis: Lessons from the Asian Experience," The World Economy, Wiley Blackwell, vol. 25(1), pages 33-57, January.
    3. Ross McLeod, 1999. "Control and competition: Banking deregulation and re‐regulation in Indonesia," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 4(2), pages 258-297.
    4. Ross McLeod, 1997. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 33(1), pages 3-43.
    Full references (including those not matched with items on IDEAS)

    More about this item


    real exchange rate; capital flows; vulnerability; balance of payments crisis; exchange rate risk; capital adequacy; moral hazard;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pas:papers:2003-11. 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: (Prema-chandra Athukorala). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.