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Theorists in this context often argued that the occurrence of East Asian crisis was the consequence of the fiscal irresponsibility performed by global institutions including the IMF, especially concerning its financial liberalization policy of the 1980s and the 1990s (Bustelo, “The East Asian Financial Crises: An Analytical Survey”). THESIS STATEMENT The following discussion hereunder intends to focus on the arguments made by Joseph E. Stiglitz on IMF intervention, which is often accounted as a key reason for the East Asian Financial crisis of the 1990s. Accordingly the discussion also includes the description of the other agendas laid by the IMF other than the promotion of stability and growth in the least developed countries of the world. HOW THE IMF INTERVENTION DID WORSEN THE EAST ASIAN FINANCIAL CRISIS OF THE LATE 1990s? According to Stiglitz, the IMF policies in respect to the gradual capital market and financial liberalization should be accounted as the most important reasons of the East Asian financial crisis in the year 1990 (89-91). Stiglitz further argues that the IMF was founded with an intention to deal with similar crisis situations, but it failed in preventing the East Asia Crisis of the 1990s rather worsening the crisis situation being emphasized to facilitate liberalization within the global economy. Such liberalization activities around the world contributed to currency speculations affecting the group of poorer and developing nations of the East Asian region (Stiglitz 91-95). Arguments by Stiglitz concentrates on the consequences of encouragement by the IMF, in support of the US Treasury, to promote capital market liberalization globally. As per the enacted policy measure of market liberalization, IMF credited the Asian markets with supply of capital in dollars as a measure to aid their sustenance in the currency exchange rates. Accordingly, the money was utilized by the countries to provide the various firms with dollars. These dollars were again utilized by the firms in the repayment of loans obtained from the Western banks increasing currency speculation. Such a transition in the capital market led to high inflation rates in the East Asian countries. Additionally, in order to rectify this problem, IMF imposed higher rates of interest, taxes and cut offs on the government expenditures in the East Asian countries at the time when they were facing the negative consequences of high degree of indebtedness. As a consequence, many firms in the East Asian countries perished, thus worsening the crisis situation in the region (Stiglitz 104-113). According to Stiglitz, another the major fault of the IMF in worsening the crisis situation in the 1990s was its policy to support the attitude of a ‘bumbling restructuring’ (Stiglitz 113-118). Undoubtedly, restricting without proper planning inhibited the stable growth and reformation within the East Asian economies. Not only so, but according to Stiglitz, the restructuring increased the chaos within these economies, which were already suffering from increasing levels of unemployment along with deepening inflation rates and huge burden of indebtedness (113-118). Above the mentioned issues, Stiglitz also argued that the most serious fault of IMF in performing its responsibilities was its greater significance to corporate welfare rather than towards the development of the rudimental levels of the East Asian ...Show more


Economic finance INTRODUCTION The arguments presented by Joseph E. Stiglitz had ignited debates around the world concerning the effectiveness of the International Monetary Fund (IMF) policies in context to the East Asian Financial Crisis of the late 1990s…
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