ABSTRACT
Following the Asian crisis, the current account balances for many Asian countries turned from deficit to surplus. For example, Korea and Thailand, which used to run current account deficits in most years over the 1980-1996 period, have run current account surpluses in all post-crisis years. The surplus continued into 2005 in most countries, and moreover, at a relatively high level in some countries, including China. The continued surplus in these countries led some to suspect persistent exchange rate undervaluation as a means of stimulating exports while suppressing imports. Combined with the rapid accumulation of international reserves in the region since 2000, this suspicion gained force (see Aizenman and Lee (2005) for a summary of the debate on new mercantilism).
