It is tempting to apply lessons from the Mexican currency crisis of 1994–95 to the Asian crises of 1997. A key factor in both regions was the inability of banking supervisors and regulators to pinpoint buildups in bad loan portfolios. High growth rates of domestic credit facilitate these buildups, creating vulnerability to interest rate increases. Such increases might be used to defend a currency against capital outflows, highlighting the role of domestic monetary policy and the exchange rate regime.
Suggested citation: “International Developments,” Federal Reserve Bank of Cleveland, Economic Trends, no. 98-12, pp. 18-19, 12.01.1998.