Working Paper
Financial Crises and National Policy Issues

In this overview we try to explain, first, why funds continued to flow towards emerging economies while fundamentals in host countries had been deteriorating before the Asian crisis (rising external deficit, with a significant liquid component appreciating exchange rates; low capital formation, particularly in Latin America), and why funding remains dry for long since 1998; the role of the nature of the predominant agents and of a process of flows rather than one shot building of stock of foreign capital are stressed. Then, the analysis focuses on the interrelations of capital flows and fiscal, monetary, exchange-rate and bank regulation policies, building on the papers prepared by participants in this project and related recent references. Finally, some policy implications are presented for booms and bust stages of inflows-led cycles.