ABSTRACT
Macroeconomics played some role in the crisis, but not the lead role. Some mistakes of macro policy were made in 1997, in Thailand for example. Excessive expansion led to excessive indebtedness. When current account deficit turned to overall balance of payments deficit, the government was too slow to follow the IMF’s advice of allowing more exchange rate flexibility. As a result, much of Thailand’s reserves were lost, and the crash was worse than it otherwise would have been, once it occurred. In this respect, the episode resembled the Mexican peso crisis of 1994. It appears that current account deficits in excess of 4 percent of GDP are a sign of possible trouble ahead.
