1 Won-Am Park and Gongpil Choi INTRODUCTION Since the devastating crisis of 1997–98, the Asian economies have shown remarkable resilience. While early post mortems cited structural weaknesses in the affected countries as the principal cause of the crisis, the speed and vigor of the subsequent recovery sits uneasily with this explanation emphasizing deeply ﬂawed economic and ﬁnancial structures. The rapid turnaround, epitomized by Korea, is widely attributed to the fundamental strength of the Asian economies. Indeed, it can be argued that the recovery was due more to the restoration of the old system, reinvigorated by macroeconomic policy stimulus and the shedding of excess capacity in heavy industry, than to any fundamental change in economic structure. All this is seen as casting doubt on the structural-ﬂaws explanation for the crisis and as supporting instead an interpretation emphasizing volatile capital ﬂows and erratic investor sentiment. To be sure, the post-crisis recovery has a transient element. There is a tendency for growth to exceed sustainable rates in the short run, as the economy begins to spring back from the crisis. This is a speciﬁc instance of a general point: growth performance in Asia over any short horizon must be placed in the context of the boom-and-bust cycles experienced by the economies of the region. It follows that any effort to identify the causes of the Asian crisis must adopt a broader perspective and a longer time frame. More than ﬁve years after the crisis, there remains considerable disagreement about why...
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