the capital flows were substantially larger than the current account deficits; see graph). The capital inflows into Indonesia, Malaysia, the Philippines and Thailand in the five years 1990–94 were twice as large as the current account deficits (Calvo and Goldstein. 1996, p. 125). Capital inflows into Thailand in 1996, for example, were equal to 13% of GDP.
The “excess” flows went to increase the foreign exchange reserves of the recipient country (in effect, being recycled back to the capital-exporting countries). But in the process they made the normal cycle in the recipient country much worse: providing the funding to make the expansion phase of the cycle go more strongly and last longer, driving up domestic demand and asset prices.