ABSTRACT
Japan was not the only high-performance economy in Asia that in the 1990s found itself in the deepest recession since the Great Depression. In 1997, the currencies of the key Southeast Asian countries could not maintain their fixed exchange rates with the U.S. dollar. They collapsed by between 60 and 80 percent within the year. This boosted the value of their large foreign liabilities. Unable to pay their debt and facing the possibility of national default, Thailand, Korea, and Indonesia asked the IMF for emergency funding. The IMF stepped in, but only in exchange for a set of stringent policies. Instead of improving, the economies of Thailand, Korea, and Indonesia deteriorated throughout 1998. The banking sectors verged on total default. Economic growth contracted. In Thailand, the country where the crisis started, manufacturing production fell by the largest amount in more than forty years. Stock markets collapsed.
