Finance and the real economy: theoretical implications of the financial crisis in Asia

This paper offers a preliminary assessment of some implications of the Asia n financial crisis for theories about the development of a global economy. The paper (i) draws together some of the available evidence about the histo ry of the crisis, and (ii) identifies some current diagnoses of its cause b efore (iii) arguing that the central implication of the crisis is that it e nables us to identify the manner in which the financial and real economies are linked. While the evidence about the chain of events and causes in this crisis still remains scattered, most diagnoses point to the particular eco nomic and political characteristics of the specific countries involved: the financial crisis reflected real conditions. By contrast, it is argued that the crisis was driven by financial considerations, that reflect the mode o f operation of the global financial system not the characteristics: of east Asia. (C) 2001 Elsevier Science Ltd. All rights reserved.