Working Paper

Dollar bloc or dollar block: external currency pricing and the East Asian crisis

Abstract: This paper provides a quantitative investigation of the East Asian crisis of 1997-99. 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 was 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.

Keywords: Dollar, American; Financial crises - Asia; Prices;

Status: Published in Emerging markets and macroeconomic volatility : a conference (2004: June 4-5)

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Working Paper Series

Publication Date: 2004

Number: 2004-35