... that, "market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than warranted by the initial weak economic conditions." Much of the crisis that began in 1997 has roots that go back further to the area's economic growth that started in the early 1990s. Although many economists consider the Asian economic collapse to have begun in Thailand, conditions throughout the region meant that other countries' economies were destabilized to the extent that they quickly followed Thailand. Throughout the early 1990s, growth in Southeast Asia attracted much foreign capital. However, by 1995 and 1996, Thailand's current account deficit had grown (from 5.7% in '93 to 8.5% in '96 [Pesenti et al., 1998]). When domestic production slowed, this account imbalance represented an even greater percentage, when compared to GDP. Much of the instability in Thailand's economy was brought about by heavy short-term borrowing that ...

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