Macroeconomic stability means that inflation is kept low and that the real exchange is stable at a competitive level. Moreover, the government budget deficit and foreign debt are kept within limits consistent with price and exchange rate stability. The high-performance East Asian economies have been very successful in creating macroeconomic stability. The high perfomance East Asian economies' prudent and consistent pursuit of macroeconomic stability has helped contribute to their high growth. Even more importantly, they have avoided major macroeconomic crises that cause sharp reductions in aggregate demand and investment.
Macroeconomic crises are very costly in terms of years of economic growth.
For developing countries, the standard deviation of growth rates is four times the mean growth rate. Such dramatic shocks have been absent in the macroeconomic record of the high-performance East Asian economies over the past three decades.