This paper applies the business cycle accounting method a la Chari, Kehoe and McGrattan (2007) to a standard neoclassical small open economy model and assesses the recent crises in Hong Kong, Korea, Singapore and Thailand. The key common features of these crises are the sudden output collapses and consumption drops as large as the output drops. Quantitative results show that the sudden drops in total factor productivity are important in explaining the output drops. Distortions in the foreign debt market are important in Korea and Thailand whereas distortions in the domestic capital market are important in Hong Kong and Singapore in explaining the large consumption drops.
Keywords: Business Cycle Accounting; Small Open Economy; Asian Crisis
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.