3. Data3.1. Measuring the crisisOur basic sample is 25 emerging markets Brazil Argentina, Chile, China, Colombia, the Czech Republic, Greece, Hong Kong, Hungary India, Indonesia, Israel, Korea, Malaysia, Mexico, Philippines, Poland, Portugal, Russia, Singapore, Thailand, Turkey, Taiwan South Africa, and Venezuela. The list includes six countries from Latin America, four from Eastern Europe, ten from Asia, plus Greece and Portugal in Europe, Turkey and Israel in the Middle East, and South Africa. There is no universally accepted definition of the "emerging markets involved in the Asian crisis, but our sample of 25 includes almost all the countries regarded as emerging by the International Finance Corporation, The Economist, J.P. Morgan, Goldman Sachs, and Flemings Research. This is the set of developing countries with relatively large financial markets and relatively open capital accounts.According to the IFC (Emerging Markets Factbook P. (1997, 334), at the end of 1996 there was completely free entry and exit of capital (with regard to listed stocks) in 12 of our countries Brazil Argentina, the Czech Republic, Greece, Hungary, Malaysia Mexico, Poland, Portugal, Russia, South Africa, and Turkey. There was also "relatively free entry and free exit in Chile, Korea, Thailand, and Venezuela. There was relatively free entry and some restrictions on exit in Indonesia. Formally, there was free entry and exit only for special classes of shares in China and the Philippines, although the anecdotal evidence suggests that these capital controls have only really been effective in China. Only authorized investors were allowed into Colombia and India, but free exit was allowed. The tightest market access, according to the IFC measure, was in Taiwan, where only authorized investors were allowed in and there were "some restrictions" on the repatriation of income and capital. The IFC did not classify Hong Kong, Israel, and Singapore.We follow the literature on the Asian crisis by regarding the extent of the nominal exchange rate depreciation as the key variable to be explained. Specifically, our most important dependent variable is the change in the nominal exchange rate from the end of 1996 to January 1999. We take the end of 1996 as the starting point and measure the change in purchasing power over the next two years of currencies relative to the U.S dollar. If the exchange rate depreciates from 2,500 to 10,000 to the dollar (as with the Indonesian rupiah), it has lost three-quarters of its purchasing power (i.e. Four times as many rupiah are needed to buy one dollar). Alternatively, its purchasing power now is one-quarter of its former level and this country would score 0.25 in our index of change in purchasing power.
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