20 Years After the Asian Financial Crisis: Lessons Learned and Future Challenges

Abstract

The Asian financial crisis (AFC) that took the world by surprise 20 years ago was a major turning point for many of the region’s economies. The crisis exposed structural weaknesses and policy distortions in crisis affected countries, along with poorly planned financial liberalization and premature capital account opening. A surge in external capital inflows— driven in part by the region’s economic success and de facto dollar peg—led to excessive credit and asset price growth across crisis-affected countries. However, these financial imbalances quickly unraveled, triggering the crisis and threatening the region’s long-term economic growth.