Authors such as McKinnon (1993), McKinnon and Pill (1996), and Diaz-Alejandro (1988)
have long cautioned about the perils of overly-rapid financial liberalization in emerging markets,
but few have taken heed of their advice. The Asian crisis does not undermine the case for rapid
liberalization of trade regimes or the removal of restrictions on long-term foreign direct
investment. But it does provide strong support for proceeding more slowly and carefully in
liberalizing domestic banking transactions and portfolio markets until the requisite regulatory
institutions are in place. (Similar lessons could be drawn from the failures of Russian Aquick
privatization@).