World Economy · Learn with evidence
The Asian financial crisis
1997–1998 · Currency and financial risk
Starting conditions
A crisis beginning in Thailand in July 1997 spread across East Asia.
How the problem spread
Short-term foreign borrowing and exchange-rate exposures made financing vulnerable when investors withdrew. Currency depreciation could increase the domestic cost of foreign-currency debts.
The response
International assistance and domestic financial reforms sought to stabilize affected economies. Responses and experiences differed between countries.
What happened afterward
The crisis produced severe economic disruption in the region, with spillovers reaching Latin America and Eastern Europe in 1998.
Limits of the comparison
Countries had different banks, debts and exchange-rate policies. A single regional average hides those differences, and recovery timelines should be examined country by country.
Think it through
What happens to a dollar-denominated debt when a borrower’s local currency falls?
Read the historical source · Checked 2026-09-09
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