This paper tries to build up a simple Index which captures the financi
al volatility of an open economy. Judged by this index, a cross-countr
y study of 21 developing nations over 1993-95 suggests that Thailand a
nd Malaysia, in spite of having strong macro fundamentals, were vulner
able to financial crisis. India performs quite well in terms of the in
dex. However, we argue that such 'performance' does not justify unfett
ered movement of short-term capital.