Asia's financial crisis and the role of the international monetary fund

This article discusses the origins of Asia's financial crisis and the role of the International Monetary Fund in dealing with that crisis. The author begins with some facts about the role of capital inflows. He points out that 1) to some extent, large capital inflows into Asia were triggered by factors that should have raised concern, and 2) because this capital was not always effectively allocated, Asian banks that played a prominent role in financial intermediation became increasingly vulnerable. He then touches on how the Asia crisis unfolded, noting the role that close regional trade and financial integration played in spreading the crisis to neighboring countries, and detailing how the crisis in the financial sector affected the real economy. He then addresses the IMF's role in dealing with the Asian crisis; he summarizes the Fund's policy recommendations and the criticism leveled about those recommendations. The Asian crisis is different from previous crises, Jonas argues, and the Fund's approach is and must be different than those it used in previous crises. He explores the issue of whether the Fund could have made a more explicit warning about the imminent crisis, and concludes with some remarks about the moral hazards present in the Fund's financial support to crisis-affected countries.