This paper provides a quantitative investigation of the East Asian crisis of 1997-1999. The two essential features of the crisis that we focus on are (a) the crisis was a regional phenomenon; the depth and severity of the crisis were exacerbated by a large decline in regional demand, and (b) the practice of setting export goods prices in dollars (which we document empirically) led to a powerful internal propagation effect of the crisis within the region, contributing greatly to the decline in regional trade flows. We construct a model with these two features and show that it can do a reasonable job of accounting for the response of the main macroeconomic aggregates in Korea, Malaysia, and Thailand during the crisis.
Cook, David, and Michael Devereux. 2004. “Dollar Bloc or Dollar Block: External Currency Pricing and the East Asian Crisis,” Federal Reserve Bank of San Francisco Working Paper 2004-35. Available at https://doi.org/10.24148/wp2004-35