ABSTRACT
The Asian Financial Crisis and the contagion it created unleashed a process of questioning the wisdom of the standard recipe of the Washington Consensus. This chapter discusses the problems of national macroeconomic policies and governance within a framework of overall global and regional financial architectures. The role of structural unevenness in the global economy is particularly important to recognize within the proposed framework of analysis. Globalization of financial markets has increased the flow of various types of capital across the borders. Exchange rate risk refers to the possibility that a country’s currency may experience a precipitous decline in value. Capital flight risk refers to the possibility that both domestic and foreign holders of financial assets will sell their holdings whenever there is an expectation of a capital loss.
