Two years have now passed since Thailand began to exhaust its foreign exchange reserves
in a futile defense of the baht, setting in motion a chain of events that developed into an Asian
financial crisis, and then later into a global financial crisis. During the past several months, a
modicum of calm has returned to the international financial markets, providing some hope that the
worst of the crisis is over. South Korea seems to be rebounding, with improvements in credit
ratings and some initial signs of a return of foreign capital. Thailand, too, despite enormous
remaining problems, appears to be recovering. Japan has taken some steps to redress its internal
problems, and is promising to take more. Interest rate cuts in the United States and several
European countries in September and October 1998 brought about some return of confidence and
stopped the immediate threat of a further spread of the crisis. The crisis countries are still far from
out of the woods, however, with difficult tasks of financial and corporate restructuring still in
their early phases, and another year of recession nearly certain in many countries. Tremendous
risks remain, as well in Indonesia, Russia, and Brazil, so it is much too early to declare the crisis
over in any true sense.