Social responses to the financial crisis in east and south east asian countries to be held in bangkok from 2224 april 1998. Regional resentment toward the international monetary fund imf and u. Section 3 analyses the economic and social costs of the east asian crises. External financing of five asian countries, 199498a billions of dollars item 1994 1995 1996 1997b 1998c current account balance 24. The crisis hit the most rapidly growing economies in the world, and prompted the largest financial bailouts in history.
The asian financial crisis and financial reforms in china. The crisis throws up important features of the economic linkages between asia and the world, and within asia. The present paper starts by providing a brief overview of the precrisis situation regarding economic growth, employment, labour market and poverty in indonesia. The asian financial crisis and aseans concept of security. While it is fortunate that the news of the near death of the east asian miracle was greatly exaggerated, this economic earthquake remains a tragic disaster in human terms. A financial crisis started in thailand in july 1997 and spread across east asia, wreaking havoc on economies in the region and leading to spillover effects in latin america and eastern europe in 1998.
If, in cases of the affected asian countries, there were strong warning signals of a heightened probability of a financial crisis prior to the 1997 crisis from such models, then there are good reasons to suggest that the crisis was caused more by weak fundamentals than by market overreaction and investor panic. Equally, the recent recovery in asia was faster and stronger than expected. The east asian financial crisis is remarkable in several ways. Different views on the causes of the crisis lead to different policy prescriptions for dealing with it. Frqwhqwv 4 lqwurgxfwlrq 6 5 dwwkhurrwriwkhdvldqfulvlv 7 6 fxuuhqwdffrxqwlpedodqfhvdqgpdfurhfrqrplfixqgdphq0 wdov. What were the causes of the asian economic, currency and financial crises. In section 2, we explore what caused the east asian crisis, and why it has been so deep and extensive. This is often called hot money because it can leave the country very quickly unlike i. The asian crisis started with attacks on currencies in the region. Mishkin graduate school of business, columbia university, uris hall 619, 3022 broadway, new york, ny10027, usa national bureau of economic research, cambridge, ma 028, usa abstract this paper provides an asymmetric information analysis of the recent east asian crisis. This paper provides an early diagnosis of the financial crisis in asia, focusing on the empirical record in the leadup to the crisis. The financial crises that followed the devaluation of the thai baht in july 1997 subsequently spread to other countries in east asia.
This monetary shift was aimed at stimulating export revenues but proved to be in vain. Nov 22, 20 asian financial crisis july 1997december 1998. Introduction the east asian countries were hit hard by the financial crisis of 1997 but experienced a significant and remarkable recovery due in part to farreaching economic and regulatory reforms. The 1997 asian financial crisis signalled the end of the asian tigers economic miracle. The crisis in east asia, like crises almost everywhere else, was preceded by a sharp increase in capital flows to the region. The commonly agreed start date of the asian financial crisis can be pinpointed to july 2, 1997 when the thai government. Before the crisis, all the east asian currencies were pegged to. Pdf examines the causes of the asian financial crisis in 1997 and the responses to it in terms of economic policies. International finance and macroeconomics this paper provides an early diagnosis of the financial crisis in asia, focusing on. The east asianfinancial crisis 19971998 lionel artige hec universityof liege september2014. We are grateful for excellent research assistance from mumtaz hussain, dilip parajuli, amar hamoudi, and gopal garuda, and for valuable inputs from frank flatters. While the erm crisis was relatively shortlived without much.
The crisis started in thailand known in thailand as the tom yum goong crisis. This triggereda renewalof attacksagainstcurrenciesmore in the north. Diagnosis, remedies, prospects brookings papers on economic activity, 1998, no. The asian financial crisis was a period of financial crisis that gripped much of east asia and southeast asia beginning in july 1997 and raised fears of a worldwide economic meltdown due to financial contagion the crisis started in thailand known in thailand as the tom yum goong crisis. Couses, policy responses, and outcomes wp998 created date. Social responses to the financial crisis in east and southeast asian countries to be held in bangkok from 2224 april 1998. The east asian financial crisis 19971998 semantic scholar. The calamity of the late 1990s saw a massive meltdown concentrated in east asia. Pdf the asian financial crisis and the role of the imf. Introduction a period of financial crisis beginning july 1997 started in thailand floatingthe pegged currency real estate driven financial over extension excessive foreign exposure resulting collapse of the thai baht also affected indonesia, south korea, hong kong, malaysia, phillipines. Loan flows, contagion effects, and east asian crisis among the debates that regained interest after the east asian financial crisis is the one concerning contagion.
Hong kong, singapore, south korea, taiwan and tiger cubs i. Indonesiaasksthe imf and the world bank for financial assistance. After posting some of the most impressive growth rates in the world at the time, the socalled tiger economies saw their stock markets and currencies lose about 70% of their value. They include the need for better market regulation, greater transparency and improved corporate governance. Asia crisis, interest rates and exchange rates, currency crises. What was the main reason for the asian financial crisis of. Lessons from koreas experience bang nam jeon1 drexel university i. First, there was debt deflation in the united states, followed by the ems crisis in europe in 19921993. The asian financial crisis was a period of financial crisis that gripped much of east asia and southeast asia beginning in july 1997 and raised fears of a worldwide economic meltdown due to financial contagion. A survey article pdf available in journal of the asia pacific economy 4urn. Section 4 evaluates policy implications, at both the national and international levels. This book examines the causes and development of the asian financial crisis, with special emphasis on its lessons for china and hong kong. Interpretations of the asian crisis have coalesced around two rival stories.
Loan flows, contagion effects, and east asian crisis. Pdf the onset of the east asian financial crisis jeffrey. The present paper starts by providing a brief overview of the pre crisis situation regarding economic growth, employment, labour market and poverty in indonesia. None of the countries in east asia were spared from the impact of the financial crisis. The asian financial crisis, also called the asian contagion, was a series of currency devaluations and other events that spread through many asian markets beginning in. Causes and sources of the asian financial crisis unctad. The asian financial crisis of the late 1990s involved many nations, public and private organizations, and people, therefore one of the best ways to tackle understanding what occurred is to look at where everything started. The asian financial crisis and the role of the imf. Section 5 examines the areas where research is most urgently needed to. The crisis hlt the most rapidly growing economies in the world and prompted the largest financial bailouts in history.
What caused the asian currency and financial crisis. It is the least anticipated financial crisis in years. We also thank very much our discussants, richard cooper and barry bosworth, for their comments and suggestions. This pdf is a selection from an outofprint volume from the national bureau. The asian financial crisis of 1997 affected many asian countries, including south korea, thailand, malaysia, indonesia, singapore, and the philippines.
From the 199798 asian financial crisis to the 200809 global economic crisis. Such weaknesses appear to reflect the inability of lenders to use business criteria in allocating credit and implicit or explicit government guarantees against risk. The global financial crisis had hit asian economies with unexpected speed and force. A survey of the literature shows little microeconomic evidence to support either view. Asian financial crisis may well be seen as a turning point in reforming chinas financial system.
Although the crisis in east asia is nearly oneandahalf years old, the economic recession continues to deepen. There exists vast literature regarding the 1997 asian financial crisis. With a high level of shortterm international debt, a depreciation of the domestic. This article compares the growth and financing patterns of east asian corporations in the years before the crisis with those in other countries. The financial crisis was first felt in thailand on july 2, 1997, in which later spread to malaysia, indonesia, philippine and singapore. This paper analyzes key features of emerging east asian banking systems ten years after the 199798 financial crisis.
The onset of the east asian financial crisis steven radelet, jeffrey sachs. The asian crisis was a direct result of this financial liberalization, and the logic was fairly straightforward. South east asian countries like thailand, malaysia etc for several years before 1997 were receiving large amount of short term portfolio investment money. Because of this difference, a unit of imf austerity and financial liberalization will have higher costs and smaller benefits in asia than elsewhere.
Two crises, different outcomesexamines east asian policy reactions to the two major crises of the last fifteen years. Keywords china, asian financial crisis, financial reforms, state preferences, state capacities introduction the asian financial crisis, which broke out in thailand in july 1997 and then spread to other parts of asia, has had a major impact on the. Corporate performance in the east asian financial crisis. During the darkest moments of the asian financial crisis in 1998, it was widely predicted that east asia would continue to be deathly sick for the next two to four years. Pdf the east asian financial crisis 19971998 semantic. A critical analysis of the 1997 asian financial crisis. Consideration is given to the broader issues exposed by the crisis that still need to be addressed. Citeseerx document details isaac councill, lee giles, pradeep teregowda. Origins of the crisis financial crises are seldom generated by one or two isolated factors. High growth and macroeconomic stability contributed to attracting private foreign capital in asia. In stark contrast, east asia avoided the worst effects of the lehman brothers collapse, incurring.
It is the sharpest financial crisis to hit the developing world since the 1982 debt crisis. This monetary shift was aimed at stimulating export revenues but. The asian financial crisis started on 2 july 1997 when the thai government, burdened with a huge foreign debt, decided to float its baht after currency speculators had been attacking the countrys foreign exchange reserves. Thailand, malaysia, indonesia, the philippines were held as role models to developing nations on how to achieve economic growth. This paper tells the story of the asian financial crisis by addressing four questions. If, in cases of the affected asian countries, there were strong warning signals of a heightened probability of a financial crisis prior to the 1997 crisis from such models, then there are good reasons. Financialsector weaknesses each of the asean4 economies experienced a credit boom in the 1990s, that is, the growth of bank and nonbank credit to the private. The experiences of argentina and mexico following the tequila crisis of 199495, as well as the experiences of many other countries in similar situations, demonstrate that when policymakers are prepared to address the root causes of a financial crisis, economic recovery is likely to begin a year or so after a crisis peaks. Emerging east asian banking systems ten years after the. A critical analysis of the 1997 asian financial crisis the. The asian financial crisis which started in currency markets in south east asia, then spread to other markets, undermined first confidence, then faith in the. The asian financial crisis of 19971998 gave new life to mahathirs east asia ideas.
775 625 179 623 788 143 1490 1162 1588 1598 809 407 532 721 1078 375 633 1238 1498 33 647 184 526 942 1357 1237 1281 1051 507 971 173 1065 838 1335 578