The East Asian Crisis: Macroeconomic Developments and Policy Lessons

Author/Editor:

Kalpana Kochhar ; Prakash Loungani ; Mark R. Stone

Publication Date:

September 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper reviews macroeconomic developments during the first year of the crisis in east Asia and draws some preliminary policy lessons. The crisis is rooted in the interaction of large capital inflows and weak private and public sector governance. At the same time, macroeconomic adjustment in these countries has resulted in some surprising outcomes, including severe economic contractions, low inflation, and rapid external adjustment. The lessons for crisis resolution include the importance of tight monetary policy early on for exchange rate stabilization, flexible fiscal policy, and comprehensive structural reform. Crises are avoided by prudent macroeconomic policies, diligent bank supervision, transparent data dissemination, strong governance, and forward-looking policymaking, even in good times.

Series:

Working Paper No. 1998/128

Subject:

Commercial banks Corporate sector Economic sectors Exchange rates Export performance Financial institutions Financial sector Financial services Foreign exchange Real interest rates

English

Publication Date:

September 1, 1998

ISBN/ISSN:

9781451935547/1018-5941

Stock No:

WPIEA1281998

Pages:

55

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