Why are some currency crises followed by economic contractions while others are not? This paper is an attempt at answering this query. In particular, we investigate two closely related questions. First, we explore whether there is a difference in the output effects of a devaluation during “normal” periods versus crises ones; after all, during noncrisis periods, real exchange devaluation is seen...

In June 2008 Justin Yifu Lin was appointed chief economist of the World Bank, right before the eruption of the worst global financial and economic crisis since theGreat Depression. Drawing on experience from his privileged position, Lin offers unique reflections on the cause of the crisis, why it was so serious and widespread, and its likely evolution. Arguing that conventional theories provide...

Since the 1997 " Asian Financial Crisis" there has been a continual drum roll of domestic currency devaluation, banking system collapses, stock market bubble burstings, and classical defined recession that moved from the periphery to the heart of the capitalist system. At the touch of this dark wand of crisis all the Brave New Economy talk of the 1990s which projected infinite, conflict-free in...

Traditionally, financial crisis EarlyWarning Systems (EWSs) have relied onmacroeconomic leading indicatorswhen forecasting the occurrence of such events. This paper extends such discrete-choice EWSs by taking the persistence of the crisis phenomenon into account. The dynamic logit EWS is estimated using an exact maximum likelihood estimation method in both a country-by-country and a panel frame...

Hong Kong has long been under a fixed exchange rate regime, relying on the currency board to maintain currency stability. Currency board is a rule-based system, but because of the gradual dilution of the rules started in the late 1980s as a result of a number of monetary reforms, the currency board has gradually emphasized more on discretion in setting its policy. Such change in the board’s pol...

I examine financial linkages in East Asia before the 1997-98 crisis by testing long-run and causal relationships between Japan’s saving and eight other Asian economies’ domestic investment. The results suggest that there is a long-run (cointegrating) relationship between Japan’s saving and the domestic investments of four of the five crisis economies and Taiwan. There is also evidence that Japa...

Most analyses of the East Asian financial crisis have focused on its causes and the links between currency and banking crises. However a related question is what happens in the aftermath of a crisis? What factors determine the path of an economy in the post-devaluation phase? Does it swiftly bounce back, with the crisis being followed by a period of economic recovery, or does it face a period o...

Who loses and who gains from globalisation is one of the big questions of our time. The people of East and South East Asia were thought be among the winners until the financial crisis hit this region in 1997. Indonesia, it seemed, suffered particularly badly with millions of people sinking into poverty. However, it became clear soon after that some parts of Indonesia had actually benefited from...