Klein won the 1980 Nobel Prize in economic science, and prior to receiving the prize he was also Shabbir’s economics instructor at Penn. The two then became colleagues as Shabbir took over several different faculty positions at the Ivy League university over the past dozen-plus years. When the professors’ offices were moved next to each other, Shabbir used the opportunity to approach Klein about the project on financial crises, which the Nobel Laureate embraced immediately.

“I was elated that he wanted to do the project. Many people want to work with Nobel Laureates and few actually get to, so I was very excited to have the opportunity to work with and learn from one of the best,” says Shabbir.

The output of their four years of work together is a book of 10 scholarly papers, never published before, on financial crises written by eminent economists and financial experts. Shabbir and Klein worked together as editors of the volume, selecting and editing the pieces and also co-authoring one of the 10 themselves. Many of the book’s pieces use the financial crisis faced in Southeast Asia in the late-90s as a backdrop to evaluate how crises occur, their impact, and what can be done to prevent their recurrence in the future.

“Our book isn’t just a post-mortem to learn from financial crises, but it also looks forward. One of our goals was to show ways in which some of the emerging powers today like China and India can avoid some of these issues,” says Shabbir.

Though it reaches beyond the financial crises that occurred in Southeast Asia, the volume is based largely on the lessons learned from countries who suffered massive economic downturns after the devaluation of the Thai Baht in the summer of 1997. Up to that time, emerging Asian countries such as Thailand, South Korea, and Malaysia were considered “economic tigers” that could do no wrong in the eyes of the World Bank and other international financial institutions. Such a view led investors and businesses to become overly optimistic about the region’s rapidly expanding economy: They made speculative real estate deals, extended themselves into questionable loans and many of the region’s countries ran budget deficits. The 20 percent immediate devaluation of the Baht in July 1997 was the match that lit the fire. The Thai stock market crashed in turn, suffering a loss of almost 75 percent in value, and the wave of crisis spilled over into South Korea, Malaysia, the Philippines, and Indonesia. Loosely connected crises occurred around the world in the years following in Russia, Latin America, Argentina, and Turkey.

Now almost 10 years later, Shabbir says, one of the fascinating aspects of the book is to be able to look back with hindsight to see not only the economic impact but what kind of societal impact the crises had in terms of social unrest including political and ethnic strife. Again, the point was not only to offer hindsight analysis but forward-thinking suggestions to prevent such conflagrations from erupting again as well as to deal expeditiously with the aftermath of any such recurrence.

One of the primary recommendations the authors make for today’s emerging economies is to base their exchange rate policy more on market forces than tying it to another key currency such as the U.S. Dollar.  Tying the baht to the U.S. dollar is what first got Thailand in trouble. Fast-forward to 2007 and the heated talk on Capitol Hill over China’s current economic policies that do just that, it seems another, even larger, crisis may be looming. Yet, Shabbir says there are some core differences between China today and these emerging countries of 10 years ago, most notably, its relatively immense trade surplus that would dilute any such problems to the degree that they would become insignificant.

Now well into his second semester on campus, Shabbir hopes to bring the ideas from the book into his classes and the learning community within CBAPP.

“I think all of this has made me a better teacher,” he says. “And my desire is to hopefully use the book and this experience to bring together a nexus of students and faculty with similar interests. I’d love to develop a networking group or a scholarly event where we can discuss some of these topics.”