That fiscal policy still matters is clear from the fact that East Asian crisis countries – and others before them,  such  as  Mexico in 1994 – 95 – suffered significant fiscal shocks at the same time as their crises. These shocks stemmed from the realization of contingent liabilities associated with failing banking systems.

Focusing on bank bailouts, Btirnside, Eichenbaum, and Rebelo argue that traditional models of currency crises are applicable to the East Asian crisis countries. The authors suggest that the deficits after the crises could have been anticipated given the region's deteriorating banking systems. Regardless, there is little doubt that government finances had important economic consequences once the currency crises were set in motion. The restructuring and recapitalization of failed banks had massive fiscal costs – in effect, contingent liabilities were converted into actual liabilities during the crises. Avoiding the crises would have required financing these costs through large explicit fiscal reforms.