The Asian Financial Crisis and Proposals for Reform of International Financial Architecture1

The recent financial crises starting from one country (e.g. Mexico in 1994, Thailand in 1997) and spreading as a contagion to others (i.e. the ’tequila’ effect of the Mexican crisis on Argentina and other Latin American countries, the spread to Malaysia, Indonesia, Hong Kong, Korea, Singapore and Taiwan of the Thai crisis, the rapid spread of financial instability after the Russian crisis in the summer of 1998) have stimulated a vast debate on the analytics and empirics of currency crises and their policy implications, particularly for crisis prevention and management. It also has generated a number of proposals for the reform of the international financial architecture and the role of the International Monetary Fund in it. In what follows we review the ongoing debate and different policy proposals.