Forecasting economic crises The events in Asia over the last 18 months have raised again the issue of whether it is possible to forecast economic crises. The international community went through the same self-examination after Mexico in 1994, and a large amount of research was done on the subject much of it by the IMF. It sounds as though it should be easy.
We can all point to obvious signs of trouble in particular countries - in Mexico, the over-valuation of the real exchange rate; in Thailand, declining exports and widening current account deficit; in Korea and Indonesia, the large amount of unhedged foreign borrowing. This type of casual empiricism, however, is not good enough; it tends to highlight a different factor for each country.