ABSTRACT
This chapter studies the experiences of East Asian countries in conducting financial liberalization. In the discussion of financial liberalization a distinction needs to be made between capital account liberalization and financial services liberalization. The Asian crisis happened in an age featuring enormous expansion of international capital flows and dramatic market opening to foreign financial services providers. Naturally, much blame was drawn on the massive financial liberalization programme implemented by countries in this region. To a large extent, this allegation is not totally unfounded: premature financial liberalization was one of the major factors responsible for East Asia's sudden descent into the 1997-1998 financial crisis. However, in carrying on capital account liberalization East Asian countries generally followed the gradualist approach, albeit some countries moved faster-with painful cost suffered during the financial crisis than the others. The mainstream economic literature on financial crises has established that premature capital flow liberalization was the major cause of financial crises.
