Policies that East Asia governments adopted to reduce the likelihood that they would experience another crisis at home contributed to the development of an even larger crisis abroad.

Question

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The policies adopted by East Asian governments, such as building up foreign exchange reserves and implementing more stringent financial regulations, helped stabilize their economies and prevent another crisis at home. However, the large inflows of capital seeking higher yields in the region led to asset bubbles and overheating in economies such as Thailand and South Korea. When these bubbles burst, it triggered a larger financial crisis that spread to other parts of the world, including Russia and Brazil. Therefore, the policies meant to prevent a domestic crisis contributed to a larger crisis abroad.

Policies That East Asia Governments Adopted to Reduce the Likelihood