ABSTRACT
The depth and the breadth of the Asian financial crisis, which is now ten years old, took everyone by surprise. Nobody had predicted it, at least not its severe impact. Initially there were two schools of thought. Some, focusing mainly on the relatively high current account deficit of Thailand, labeled it as a traditional current account crisis like the debt crisis of the 1980s in Latin America, while others argued that it was a new type of crisis associated with the increasing integration of Asian countries with global capital markets. Eventually, there was a consensus that it was a capital account crisis preceded by large private capital inflows and triggered by sudden shifts in market sentiment, which led to massive capital flow reversals. Shifts in market sentiments were in turn due to weaknesses in the financial and corporate sectors of these countries. The currency crisis also quickly led to a banking crisis.
