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In the third episode of our series on the Asian financial crisis, we talked with Andrew Sheng, a Distinguished Fellow at the Asia Global Institute. Andrew has worked as a central banker, financial regulator, academic, and advisor to numerous Asian financial organizations. He had firsthand experience of the Asian financial crisis when he was serving served as the Deputy Chief Executive of the Hong Kong Monetary Authority.  

Some of the key takeaways of our conversation with Andrew include:

• The financial linkages and interdependencies among different countries in Asia were not fully understood prior to the crisis and made policy response difficult.
• The depreciation of the Japanese yen led to a regional economic slowdown, exposing risks that would ultimately precipitate the crisis.
• Many of the problems that created the Asian financial crisis were left unresolved—such as inadequate response to insolvency— and these issues would later contribute to the global financial crisis.
• Currency pegs can be useful, but economies must be willing to endure a lot of pain to maintain them.
• Policymakers must be clear on whether they are facing a liquidity crisis or a solvency crisis. The policy prescriptions for each are very different.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.