This IMF working paper, by Piti Disyatat examines the aftermath of recent currency crises. Why did the developed countries which devalued during the ERM crisis fare so much better than those developing countries caught up in the Asian crisis of 1997-8?. The answer, Disyatat proposes, may lie in the health of the banking system. In many Asian countries the banking sectors were ex-ante in a weak state due to the quantity of unhedged forex exposures on their books. As a result they were