At the same time, capital inflows would have led to an expansion of monetary aggregates given the fixed or highly managed exchange rate regime that had been adopted by most of these economies. Many emerging markets that received large capital inflows in the early 1990s appear to have experienced a concurrent expansion in their monetary aggregates, and tried to sterilise inflows, although in many cases this was either incomplete, given the high implied quasi-fiscal cost associated with sterilisation, or it encouraged further short-term inflows.

Table 4: Current account deficit in a selection of developing countries (US$b)
	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	For the period 1987-1996 (cumulative)
East Asia
Indonesia	-1.4	-1.1	-3.0	-4.3	-2.8	-2.1	-2.8	-7.0	-8.0	-4.8	-37.3
Malaysia	1.9	0.3	-0.9	-4.2	-2.2	-3.0	-4.5	-7.4	-5.1	-4.9	-29.9
Korea	14.5	5.4	-1.7	-8.3	-3.9	1.0	-3.9	-8.3	-23.1	-13.8	-42.0
Philippines	-1.3	-2.5	-2.7	-1.1	-1.0	-3.0	-3.0	-3.3	-3.9	-4.1	-25.8
Thailand	-1.7	-2.5	-7.3	-7.6	-6.3	-6.4	-8.1	-13.6	-14.7	-5.3	-73.3
Rest of Asia
India	-7.2	-6.8	-7.0	-4.3	-4.5	-1.9	-1.7	-5.6	-4.1	-4.9	-48.0
Pakistan	-1.4	-1.3	-1.7	-1.4	-1.9	-2.9	-1.8	-3.3	-4.0	-3.4	-23.1
Sri Lanka	-0.4	-0.4	-0.3	-0.6	-0.5	-0.4	-0.8	-0.8	-0.7	-0.6	-5.3
Eastern Europe
Hungary	-0.4	-0.5	0.4	0.4	0.4	-4.3	-4.1	-2.5	-1.7	-1.0	-13.3
Poland	-0.1	-1.4	3.1	-2.1	-3.1	-2.3	-0.9	5.5	-1.4	-4.8	-7.6
Latin America
Argentina	-1.6	-1.3	4.6	-0.6	-5.4	-7.5	-10.0	-2.4	-4.1	-9.9	-38.4
Brazil	4.2	1.0	-3.8	-1.5	6.1	0.0	-1.2	-18.1	-24.3	-33.8	-71.5
Chile	-0.2	-0.7	-0.5	0.1	-0.7	-2.1	-0.6	0.1	-2.9	-3.1	-10.7
Colombia	-0.2	-0.2	0.5	2.3	0.9	-2.1	-3.1	-4.1	-4.8	-5.5	-16.1
Mexico	-2.4	-5.8	-7.5	-14.9	-24.4	-23.4	-29.7	-1.6	-1.9	-6.2	-117.7
Peru	-1.8	-0.6	-1.4	-1.6	-2.1	-2.3	-2.7	-4.3	-3.6	-3.3	-23.7
Venezuela	-5.8	2.2	8.3	1.7	-3.7	-2.0	2.5	2.0	8.8	5.6	19.6
Source: Economist Intelligence Unit and Datastream/ICV

A direct consequence of the monetary overhang, along with the credit boom and resultant high rates of investment rates, appear to have been rapid and sustained economic expansion. In some emerging markets, the output gap-defined as the excess of actual output over potential as a percentage of potential output-has been positive for sustained periods and which has in turn led to inflationary pressures. A substantial proportion of these pressures, however, appear to have been channelled into the stock market and also non-traded sectors with fixed supply. The rapid expansion of the economies also led many of these countries to run significant current account deficits.