ABSTRACT
Since mid-1997, a highly contagious financial crisis swept through the economies in East Asia, resulting initially in a free fall of their respective currency values. The crisis subsequently led to bulging unemployment rates and a general economic downturn in these economies. Among others, Thailand, Indonesia and Korea were the hardest hit by the crisis. Such currency crises were not new and had occurred a few times previously in other economies. However, the depth and consequences of the Asian crisis alarmed many people, in the business sector and in the academia, who had touted the remarkable success of the Asian economies as the ‘Asian miracle’. 1 However, there were some economists, such as Paul Krugman (1998a), who had predicted a crisis in Asia.
