The Roots of the Asian Financial Crisis

The outbreak of the Asian financial crisis in 1997 has perplexed many observers, in part because it followed on the heels of one of the most impressive regional growth records the world has witnessed. The heterogenous structures of Asian newly industrializing economies (NIEs) that experienced the financial crisis complicate efforts to disentangle its causes. This chapter evaluates several competing explanations for the crisis and proposes a synthesis of the two primary views. The explanation proposed here focuses on the linkages between liberalized capital flows and the export-led growth strategy adopted by Asian economies.