The Asian Financial Crisis

The Asian Financial Crisis: Crisis, reform and recovery

Shalendra D. Sharma
Copyright Date: 2003
Pages: 416
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  • Book Info
    The Asian Financial Crisis
    Book Description:

    The Asian financial crisis of 1997-98 shook the foundations of the global economy and what began as a localised currency crisis soon engulfed the entire Asian region. What went wrong and how did the Asian economies long considered 'miracles' respond? How did the United States, Japan and other G-7 countries respond to the crisis? What role did the IMF play?. Why did China, which suffers many of the same structural problems responsible for the crisis remain conspicuously insulated from the turmoil raging in its midst?. What explains the remarkable recovery now underway in Asia? In what fundamental ways did the Asian crisis serve as a catalyst to the current thinking about the "new international financial architecture"?. This book provides answers to all the above questions and more, and gives a comprehensive account of how the international economic order operates, examines its strengths and weaknesses, and what needs to be done to fix it.

    eISBN: 978-1-84779-057-6
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-v)
  3. List of tables and figures
    (pp. vi-vi)
  4. Acknowledgements
    (pp. vii-viii)
  5. 1 Introduction: issues, debates and an overview of the crisis
    (pp. 1-65)

    In his celebratedManias, Panics and Crashes,Charles Kindleberger (1978) predicted a historical average of at least one financial crisis per decade. Yet, in Gerard Caprio’s (1997, 79) memorable phrase, the 1990s have been a period of boom in busts. A financial crisis every twenty-four months – beginning in 1992–93 with the speculative attacks against several currencies in the Exchange Rate Mechanism (ERM) of the European Monetary System, followed by the sudden collapse of the Mexican peso in December 1994, and more recently, the Asian financial crisis that was set off when the Bank of Thailand devalued the baht...

  6. 2 Thailand: crisis, reform and recovery
    (pp. 66-122)

    When Thailand, the paradigmatic economic success story, fell victim to the crisis, many analysts were dumbfounded – instinctively blaming the pervasive cronyism and corruption for the country’s troubles. However, as it turned out, cronyism, corruption, clientelism and weak corporate governance were only part of the problem. After all, these problems existed while Thailand notched up impressive growth rates for more than a quarter-century before the financial meltdown in July 1997. Rather, this chapter argues that it was the volatile convergence of a mounting current account deficit, a sharp export slowdown, currency and maturity mismatches among Thai commercial banks, the maintenance...

  7. 3 Indonesia: crisis, reform and recovery
    (pp. 123-179)

    In mid-1998, a World Bank study (1998) grimly noted that “Indonesia is in deep economic crisis. A country that achieved decades of rapid growth, stability, and poverty reduction is now near economic collapse … no country in recent history, let alone one the size of Indonesia, has ever suffered such a dramatic reversal of fortune.” There is bitter irony in Indonesia’s fall from grace. Long hailed as a model of successful economic development, it was widely expected to escape the fate of Thailand.¹ Between June and August 1997, as Thailand’s economy unraveled and the virulent Asian flu sent shock waves...

  8. 4 Korea: crisis, reform and recovery
    (pp. 180-251)

    In the 1950s, Korea was among the poorest countries in the world, with a per capita income of under US$100. In per capita terms, this placed the country below Haiti, Ethiopia, Peru, Honduras and India, among others. Ravaged by a brutal war between 1950 and 1953, a divided Korea was predicted to remain a “basket-case” for the foreseeable future. However, South Korea (hereafter Korea), defied the dire predictions – becoming in less than a generation the quintessential developmental success story, and a model for other developing countries to emulate. With the exception of a relatively short-lived recession in 1979–80,...

  9. 5 The domino that did not fall: why China survived the financial crisis
    (pp. 252-283)

    When the financial crisis unexpectedly hit the high-performing East and Southeast Asian economies in mid-1997, it was widely believed that the People’s Republic of China (PRC) would be the next domino to fall. China’s extensive intra-regional trade and investment linkages with the rest of Asia, and the fact that the Chinese economy suffers from many of the same debilitating structural problems that long plagued (and ultimately did incalculable damage) to the Republic of Korea (South Korea), Thailand, Malaysia and Indonesia – namely, fragile bank-dominated financial systems, poor prudential surveillance and weak central bank regulation and supervision of commercial banks, a...

  10. 6 Beyond the Asian crisis: the evolving international financial architecture
    (pp. 284-339)

    Shortly after the Mexican peso crisis, the G-7 countries launched an effort to strengthen the international financial system. The goal was to expeditiously formulate and implement measures to prevent (or at least mitigate) the risk of future crises and to cope more effectively with those that still occur. At the Halifax Summit of 1995, the G-7 governments made a number of recommendations to this effect. Most notably, they urged the IMF to intensify its surveillance of its members’ policies and to send explicit messages to governments that seem to be avoiding the necessary policy reforms. In addition, the G-7 asked...

  11. 7 Conclusion: post-crisis Asia – economic recovery, September 11, 2001 and the challenges ahead
    (pp. 340-353)

    In the aftermath of East Asia’s spectacular economic collapse in mid-1997 even the most optimistic predictions gave at least a decade before Asia could fully recover.² Yet, in early 2000, an IMF study triumphantly noted that “the financial crises that erupted in Asia beginning in mid-1997 are now behind us and the economies are recovering strongly” (IMF 2000a). Indeed, the economic recovery between the second quarter of 1999 and the last quarter of 2000 was simply astounding. South Korea, Thailand, Malaysia and the Philippines notched growth-rates equal to or above those just before the crisis. South Korea made the biggest...

  12. Bibliography
    (pp. 354-391)
  13. Index
    (pp. 392-400)