Yet I agree with Paul Krugman who, when commenting on the current situation, said: “Yet governments are no more stupid or irresponsible now than they used to be; how come the punishment has become so much more severe?” These countries have had to make a very rapid adjustment to their external positions to stop their exchange rates from falling below the extremely low levels they reached late in 1997.
BIS Review 41/1998  -4-  They could not rely on a resumption of capital inflow to stop the problem, so the only feasible way was to return their current accounts to surplus. This has involved very tight policies, a very large fall in domestic demand, and very large falls in imports.