The recent currency crises in Latin America and Asia have hit countries with strong macroeconomic fundamentals but weak domestic financial systems. Private capital flows, attracted by disorderly financial liberalisation and exchange rate pegs, reversed abruptly when financial-sector weaknesses...

Large current account deficits are often assumed to play an important role in the propagation of financial crises in emerging markets in receipt of heavy private capital inflows. This paper reaches some major conclusions. First, the Lawson Doctrine — according to which current account deficits...

• The unprecedented withdrawal of foreign private capital from Asia, more than 10 per cent of GDP in the crisis countries, confronts them with a transfer problem. Creditor governments should induce their home banks into financial rescue operations to reduce moral hazard in private-sector...