This paper analyzes how the crisis in Asia spread during the second half of 1997. We cast our net
wide and investigate several possible trade and financial linkages among the Asian economies. We
construct a series of “contagion vulnerability indices,” which capture the various manifestations of
exposure through trade and finance to the initial crisis country and contrast the predictions of this
index to actual outcomes during the Asian crisis. We pay attention to the reversal in bank lending
of Japanese and European banks, which were lending heavily to emerging Asia on the eve of the
crisis. Daily interest rate and exchange rate data for Indonesia, Malaysia, the Philippines, South
Korea, and Thailand are used to assess whether the patterns of causality and interdependence
changed as the crisis spread, as well as to answer question of whether interdependence among the
Asian economies has changed as the result of the crisis