Asia's 'Victorian' financial crisis

Like the European economic crises of the nineteenth and early twentieth cen turies, the crisis in East Asia is essentially an overproduction crisis. As in other such episodes, the East Asian case was characterised by large cur rent account deficits prior to the crisis. Capital flows were channelled in to investment projects, yet the region's underdeveloped banking systems ser ved to exacerbate liquidity fluctuations rather than limit them. IMF resour ces and demand management are essential for crisis management. In the long run, currency blocks may produce more stable currency arrangements.