Barry Eichengreen on the East-West Debate over the Asian Financial Crisis
In the seventh episode of our series on the Asian financial crisis, we spoke with Barry Eichengreen, a professor of economics and political science at UC Berkeley. He’s written extensively about the sequencing of financial opening in Asia and the challenges associated with cross-border capital flows. He’s also authored numerous articles looking back on the lessons from the Asian financial crisis.
Some of the key takeaways of our conversation include:
- There tend to be differing explanations for the origins of the crisis in Asia and the West. Asian explanations tend to focus on the destabilizing role of cross-border capital flows while foreign observers often emphasize the importance of so-called “crony capitalism” and unsustainable investment.
- Many Asian economies struggled to switch from an investment-intensive growth model to more balanced growth as they reached middle income status.
- A build-up of large foreign exchange reserves post-crisis is helpful, but by no means immunizes Asia from future crises. A movement towards more flexible exchange rates is key.
- Financial supervision was lacking during the Asian Financial Crisis and remains crucial to prevention of future crises.
- Many of the problems previously thought to be distinct to emerging markets appear to be universal in light of the experience of developed countries during the global financial crisis.