ABSTRACT
After a year of impressive exchange-rate performance, monetary policy mistakes crept back into relevance in East and Southeast Asia in 2000 to a degree that could affect the region’s financial health past 2001. Asian currency watchers noted that in November 2000, just as “ASEAN plus 3” leaders assembled to discuss beefing up currency-supportive multilateral foreign exchange (forex) swap agreements—the Chiang Mai Initiative—several economies were returning to every-man-for-himself, competitive devaluationist exchange-rate policies. This was fueled by both internal factors (such as structural weaknesses) and external factors (high oil costs, a weak Euro, U.S. interest rate policy, global tech stock declines, and concerns over a “hard” American economic “landing” ) that collectively caused Asian governments to backslide on currency values. Yet in 1999 the most volatile regional currency lost a mere three percent on net (see Table 1). This phenomenon was seen both in the less-developed Asean member countries as well as in tech-heavy “Tigers” Taiwan and South Korea.
