This means, especially, that it is extremely dangerous for a developing country to borrow in hard currency. The exchange rate depreciation that accompanies a financial crisis greatly increases the home-currency value of foreign debt. Debt-heavy financial structures, especially those denominated in foreign currency, are too risky for emerging economies in today s world. Growth has quickly been restored in east Asia and Mexico . Granted, real wages in Mexico, Thailand and Indonesia are still well below pre-crisis levels.
Recovery is far from achieved.
But there is good reason to think that recovery will be completed in a much shorter time period than after previous financial crises. A few years ago everyone agreed that international financial institutions needed major reform. Despite the fact that the two camps proposed opposite reforms to each other, everyone agreed that reform was indeed necessary. Yet here we are. What went right was that our global institutions did a much better job of handling the crises of the 1990s than the folk wisdom holds.