The Anatomy of the East Asian Crisis: an Alternative Model of Currency Crises.

In the prolific literature that followed the East Asian crisis two core ideas seemed to gather considerably support amongst reserachers, namely that previous models of currency crisis are not fully suitable to examine this particular set of events and that the Asian crisis ensued from a financial plight. The analysis presented here attempts to contribute to remedy the former while challenging the latter ongrounds that it tells only part of the story. This paper employs a macrodynamic model to examine how the increase in the money supply that predictably follows financial liberalisation renders a country vulnerable to a currency crisis in the presence of uncertainty on the timing of the monetary expansion reversal that may eventually lead to a fully-fledged crisis.