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Abstract
The scope and severity of the economic crisis that swept through the East Asian region less than two years ago are well documented. However, consensus has yet to be made about the underlying causes of the crisis, the relative importance of each cause as well as the relationship among them. At the outset, it was a seemingly sudden reversal of foreign capital flows that triggered a currency crisis, initiating in Thailand and then spreading out across the region. Shifts in external conditions, in particular increased competition from other developing countries such as China and Mexico, are said to have eroded the export competitiveness and hurt the profitability of the firms in the region. These developments may have been factors in triggering the flight of foreign capital out of the region in that they raised concerns among investors about the ability of those firms to repay their debts. Certain macroeconomic and exchange-rate policy measures undoubtedly played an important part, especially in the last months leading up to the crisis.
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