ABSTRACT
In the crisis years of 1997–98, the hardest-hit Asian countries experienced net capital outflows of more than $80 billion. Almost all of the outflows originated as banking flows. The majority went first to offshore centre banks and then to banks in Europe. Much of the capital eventually reached the United States, but in the form of foreign direct investment or portfolio investment rather than banking flows. An equilibrium analysis of supply- and demand-side channels suggests that the overall effect of the crisis on US GDP was positive but small.
