ABSTRACT
In the Asian fi nancial crisis (AFC) in 1997-8, because of sudden stops and/or reversals of foreign capital infl ows, emerging economies in the Pacifi c region experienced nightmarish economic downturns for the fi rst time in two decades. Their virtual dollar peg system of exchange rates collapsed, and their domestic fi nancial systems were forced to implement structural reforms. In contrast, in the global fi nancial crisis (GFC) in 2008-9, these economies were mostly immune from those sudden stops of foreign capital fl ows and were able to sustain handsome economic growth compared to advanced economies, which suffered from sudden stops of capital fl ows and prolonged economic downturns thereafter.
