The Asian currency crisis was remarkable for the fact that it affected multiple countries in a region of the world. Prior to the crisis in 1997, the region had enjoyed enviable growth and massive inflows of foreign capital to finance an economic boom. A stable, pegged exchange regime encouraged foreign capital and investment. What went wrong? Some economists point to fundamental economic imbalances as the root cause of the currency crisis, while others argue that financial panic was what instigated the event.

Was the main problem the economic crisis? Or the financial crisis? If both were a problem, which problem was most crucial in explaining the Asian currency crisis? Explain your answers.

Provide references