"If you want to get somewhere else, you must run at least twice as fast asthat!": The roots of the East Asian crisis

Most East Asian economies have been following growth trajectories which inv olve ever-intensifying competition in external product markets. The financi al crisis of 1997-98, whilst clearly having roots in the operations of both global and national financial systems, is in large part a reflection of th ese long-run growth trajectories. This is because the concentration by thes e economies in commodity sectors with low barriers to entry has resulted in macroeconomic policies that depend for their success on depreciations in r eal exchange rates. The crisis in 1997-98 reflects a return to these growth paths after the divergent appreciation of real exchange rates in the early 1990s. Not all Asian economies have followed this path, with Japan, Singap ore, Taiwan and perhaps Korea being the exceptions.