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Federal Reserve Bank of San Francisco
Working Paper Series
Dollar bloc or dollar block: external currency pricing and the East Asian crisis
David Cook
Michael B. Devereux

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.

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David Cook & Michael B. Devereux, Dollar bloc or dollar block: external currency pricing and the East Asian crisis, Federal Reserve Bank of San Francisco, Working Paper Series 2004-35, 2004.
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Keywords: Dollar; American ; Financial crises - Asia ; Prices
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