ABSTRACT
Most analyses of the Asian currency crisis to date have identified the fragility of the banking systems in the crisis countries as a central factor (IMF 1997d; Krugman 1998a; Moreno 1998). The existence of rapid short-term capital inflows and pegged exchange rate regimes prior to the crisis meant that monetary policy was becoming increasingly ineffective, leading in various degrees to credit growth and inflation (Glick and Moreno 1994; Leung 1996). In an environment of poorly regulated financial intermediaries, moreover, this resulted uniformly in asset price inflation.
