The 1997 Asian financial crisis showed that inconsistent macroeconomic policies can imperil the safety of financial systems, and that weak financial systems can also easily undermine macroeconomic fundamentals. With increasing globalization and international capital flows, vulnerabilities in one economy can quickly spill over to affect others. Wise policy choices and institutional reforms not only benefit a country itself, but also benefit neighbors with closely tied economies. Consequently, there has been heightened interest since the crisis in strengthening economic and financial risk management at national, regional, and international levels. Improved risk management mechanisms within and among countries, including information exchange, regional economic monitoring, and policy dialogue, are increasingly being recognized as vital for maintaining domestic, regional, and global economic and financial stability.
KeywordsGross Domestic Product Real Exchange Rate Early Warning System Currency Crisis Early Warning Signal
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