Financial Crisis and Elusive Recovery

The current crisis in emerging markets may signify the end of a phase of international capitalism in which deregulation and increased economic integration have led to increased volatility and uncertainty. This article examines - with a focus on Thailand and South Korea - the factors that led to financial liberalisation, the link between financial openness and crisis and the problems that persistence with open regimes creates for efforts to overcome the crisis. The experience shows that developing countries will have to control and regulate capital flows in accordance with national priorities.