Government Intervention during the Asian Crisis

countries. They were viewed as models for advances in technology and economic improvement. In the summer and fall of 1997, however, they experienced financial problems, leading to what is commonly referred to as the “Asian crisis,” and resulting in bailouts of several countries by the International Monetary Fund (IMF). Much of the crisis is attributed to the substantial depreciation of Asian currencies, which caused severe financial problems for firms and governments throughout Asia, as well as some other regions. This crisis demonstrated how exchange rate movements can affect country conditions and therefore affect the firms that operate in those countries. The specific objectives of this appendix are to describe the conditions in the foreign exchange market that contributed to the Asian crisis, explain how governments intervened in an attempt to control their exchange rates, and describe the consequences of their intervention efforts.