This paper talks about the initial stages of the Asian Economic Crisis and analyzes the major causes of it. Several structural weaknesses in the economies of South East Asia are identified as the causes of the crisis. Active IMF’s intervention helped to stabilize the situation in the region…
Initial contagion was from Thailand to Indonesia. The other countries followed. It is argued that investors in Malaysia and the Philippines had irrational reactions since they acted to reflect that they grouped South East Asia countries alike without detecting the differentials in these economies (University of Hong Kong, 6-7). Underlying Causes of the Crisis The following topic looks into several structural weaknesses in the economies of South East Asia. These are: current account deficit, over-inflated asset prices, excess lending, corruption and macroeconomic policy mistakes. A. International Capital Flow and Excessive Monetary Growth Asia’s fast economic development in the 90’s coincided with and was attributed to capital flows to emerging markets during that period. The following table shows the Net Private Capital Flows to East Asia between 1994 to 1996 adapted from World Bank Global Development Finance, 1998. Source: International Financial Statistics, January and December 1999, IMF, Instead of letting their currencies to appreciate, some countries which operated a managed or a pegged exchange rate system like Thailand and Malaysia formed domestic liquidity to absorb the effects of the increasing large capital inflows. These led to unsustainable monetary growth. Credit and money growth rates shot to about 30% annually. This was one of the major mistakes of the East Asia economies that led to problematic shock that caused the economic and financial crisis of Asia (IMF, 56). B. Weaknesses in the Economies Susceptibility of Asian countries to the crisis was heightened by several structural weaknesses in their economies that were aggravated by massive capital inflow and excessive monetary growth in the region. 1) Moral Hazard, and...
This paper is the best example of analysis of the major causes of the Asian Economic Crisis, which lasted from 1996 to 1998. Not only the causes of the crisis and its chronological development are being considered, the paper also captures some of the policies put in place, first of all by IMF, to counter the effects of the crisis and bring back the economies affected into their initial state.
Asian financial crisis developed rapidly into a global financial and economic crisis from mere initial speculations of currencies. With the developments in the financial market in Thailand, there arose spillover effects to other financial markets around Thailand. Investors reassessed risk factors and began to take actions in a bid to mitigate effects of such happenings as those in Thailand. Initial contagion was from Thailand to Indonesia. It is argued that investors in Malaysia and the Philippines had irrational reactions since they acted to reflect that they grouped South East Asia countries alike without detecting the differentials in these economies
One of the major causes of the crisis was the international capital flow which flooded the financial markets of these regions. Several structural weaknesses in the economies of South East Asia, such as current account deficit, over-inflated asset prices, excess lending, corruption and macroeconomic policy mistakes, led to the rapid unfolding of the negative events.
The fall of equity markets was followed by the depreciation of the currencies and severe contractions in the real economies of the region. IMF stepped in by offering financial assistance, formulating agreements, regarding policy changes and addressing structural weaknesses through restructuring of various sectors. ...
Cite this document
(“Asian economic crisis: the initial stages of the crisis and the major Essay”, n.d.)
Retrieved from https://studentshare.net/macro-microeconomics/6148-asian-economic-crisis
(Asian Economic Crisis: The Initial Stages of the Crisis and the Major Essay)
“Asian Economic Crisis: The Initial Stages of the Crisis and the Major Essay”, n.d. https://studentshare.net/macro-microeconomics/6148-asian-economic-crisis.
This essay helps to understand the root causes of the protracted economic recession in the US. It is argued in the essay, that the crisis had been building up for many years. There are many reasons why the American economy is in recession. Countries like China and India have also played their part in this economic crisis in America.
The unstable increase in the price due to increasing demand for houses and uncertain demand for mortgages by the financial sectors were the major reasons behind for the eruption of 2008 US crisis. At the same time, it has been identified that there laid significant differences and similarities between the 1998 Asian financial crisis and 2008 US Financial crisis.
Least expected is that, in a very short period of time, a financial crisis sprouted in Thailand and spread like epidemic to the neighbouring countries of Southeast Asia and eventually triggered serious turmoil in the currency and financial markets of Japan and South Korea.
Suddenly, the economies began to decline and the investors were not able to pull out their money from the crashing markets, hence, life only became nice to them for short-term and the long-term security was drained. The advent of globalization has make it even more difficult for the world, as the loss faced by one part of the world will directly effect the economies of the other half.
Foreign Debt to Gross Domestic Product (GDP) ratio rose by almost 60%.
ASEAN consisted of Indonesia, Malaysia, Singapore, Philippines, Thailand, Brunei, Vietnam, Myanmar, Laos and Cambodia. It was formed to ensure sovereignty. It was nothing like European Union.
crisis was triggered by the decision of Thailand to float the baht after exhaustive efforts of the government of the country to support the currency failed. Note that the severe over-extension of the value of the baht was caused by the sudden dive in the real-estate business of
There is a sudden need of remedial action in order to make a change to the negative effects of the economic development. The consequences of the sudden impulse in the economy are unfolding its unseen aftermaths gradually and
Arousing of alarm concerning serious hazards or even to make people free from fear is rated to be the most objective of the crisis communication. Assisting people to understand, to bear their feelings, and to adapt perfectly
10 Pages(2500 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Asian economic crisis: the initial stages of the crisis and the major causes of it for FREE!