Document Type



Politics (Scripps)

Publication Date



Economics | Economic Theory | International Economics | Political Economy


It is interesting that domestic and international financial liberalization are among the most often cited causes of the 1997–98 crisis. Liberalization in the Asian crisis countries took place prior to the crisis as did large capital inflows, many of which reversed during the crisis in the classic pattern of capital flow bonanzas ending in sudden stops (Calvo, Izquierdo, and Mejía 2008; Reinhart and Reinhart 2008; Sula and Willett 2009). Furthermore, China and India, with much less general financial liberalization and a continuing array of capital controls, were little hit by the crisis. Malaysia’s experiment with increasing capital controls during the crisis, while not the resounding success that some enthusiasts suggested, was certainly not the catastrophe that many critics predicted. As a result, in many quarters support for financial liberalization suffered a strong blow.


Posted with permission.

Rights Information

© 2009 Korea Economic Institute