...| Asian Crisis of 1997 | | | Prepared by:Azra Becirovic and Sanela Bilalic | | April 21, 2012 | Long before Asian financial crisis has started, South Korea, Thailand, Indonesia, and Malaysia had an increasing economic performance; economy was fast growing, saving rates were high, and inflation low. Turning point in Asian economy was 2 July 1997, the day when Thai Baht fell around 20 % against the $US. “It all began in Thailand’ summarizes the conventional explanation of the early stages of the crisis.” (Hill, p.3) How it all began, what factors caused the crisis, what segments were affected the most, what was the backup plan, and what policies should have been taken to prevent the crisis are the points that this paper will cover. First and Second-Generation Models According to 1996 annual report of Bank for International Settlements (BIS), pre-crisis fundamentals exhibit economic performance of Asian countries. They’ve experienced moderate inflation rates of about 6%, high savings rate of 32%, and trade openness indicators of 39%. Table 1: East Asian Economic Conditions Before Crisis Although accounting and macroeconomic analytics have failed to foreseen the currency crisis, which is inevitable, first and second-generation models explain us was it due to weakening macroeconomic fundamentals or financial contagion. In accordance to first-generation model developed by Krugman 1979, market-speculative movements, in response to policies, are incompatible...
Words: 4114 - Pages: 17
...LENDING ARRANGEMENTS OF THE IMF IN EUROPEAN UNION IN TIMES OF CRISIS – CHARACTERISTICS AND EVOLUTIONS ORĂȘTEAN Ramona Lucian Blaga University of Sibiu, Romania Abstract: This paper focuses on the lending arrangements of the IMF in EU countries during crisis period. First, we reviewed the literature regarding IMF-supported programs in times of crisis. On the other hand, we provided a description of the IMF arrangements in EU countries in 2008-2013. We found that these programs differ in type, duration, amount and conditionality, but not significantly in their key objectives (achieving sustainable public finances and ensuring financial sector stability). Key words: IMF lending arrangements, EU countries, crisis 1. IMF – supported programs in times of crisis – a literature review Some authors examine the role of the IMF as crisis manager and crisis lender (Boughton, 2000; Chandavarkar, 2002), the role played by the IMF as a creditor and as a monitor of economic reforms (Marchesi and Sabani, 2007) or the efficacy of IMF's finance in preventing financial crises (Brandes and Schule, 2008). Many articles have been written on the role of the IMF in financing and designing economic reform programs for developing countries and in dealing with crisis periods, thus: - the IMF's role in dealing with the Asian crisis in Thailand, Indonesia and South Korea in 1997-1998 (Jonas, 1999; Ito, 2007); - the IMF-supported program in Indonesia during the crisis period...
Words: 2902 - Pages: 12
...THE INTERNATIONAL MONETARY FUND AND EXCHANGE RATE CRISIS MANAGEMENT∗ CHONG-YAH LIM Albert Winsemius Chair Professor of Economics Director, Economic Growth Centre (EGC) School of Humanities and Social Sciences (HSS) Nanyang Technological University (NTU) S3-01B-38, Nanyang Avenue, Singapore 639798 acylim@ntu.edu.sg The article analyzes the limits of the IMF as a global multilateral economic agency to handle serious balance of payments disequilibria. Capital control and growth rates in developing Asia and the twin deficit problem of the United States are also discussed. It also assesses the probability of the reemergence of an exchange rate crisis in Southeast Asia and the wisdom of having an Asian IMF. “Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” — John Maynard Keynes The Economic Consequences of Peace Keywords: Exchange rate crisis; capital control; growth rates in China and ASEAN; East Asian financial crisis; US twin deficits; IMF; AMF. 1. Post-Crisis Per Capita Income A not well-known fact is that all the six economies in Southeast Asia adversely affected by the 1997/1998 financial crisis have not, until today (November 2005), some eight years later, recovered from the pre-crisis per capita income level in US dollar terms (see Table 1). Thailand’s per capita income in 1996 was US$3,084. After the impressive post-crisis recovery eight years later in 2004, it decreased by 18.3% to US$2,519...
Words: 4278 - Pages: 18
...Asian financial crisis’ impact on the employment of banking sector in Malaysia. In the finance, insurance, real estate and business service sector, a number of 6,596 workers were retrenched. Banks were forced into mergers and acquisition as well as downsizing, trim lean, organizational changes and introduction of new technologies. Excess workers were offered a “voluntary separation scheme.” These retrenched workers became the urban poor facing high cost of living and no opportunity for jobs as there is no safety net provided. 1. Introduction The economic meltdown began in Thailand in July 1997 and spread to other countries in the region, such as Malaysia, Indonesia, the Philippines and South Korea. This phenomenon was later called the "contagion effect." To improve economic foundations, Thailand, Indonesia and South Korea decided to ask for and received rescue packages from the International Monetary Fund (IMF). However,...
Words: 7422 - Pages: 30
...Aggravator, or Rescuer? Criticisms on the controversial roles of IMF in East Asia Financial Crisis Introduction Now and then, nation to nation, financial crises are inevitable: Mexico in 1994, the whole East Asia region in 1997, Brazil in 1999, and the most recently Argentina in 2001. Looking back to the victims of such financial crises, we found that most of them are labeled as the developing countries, whose financial sectors were still weak at that time yet were impetuously exposed to the advocated ‘Liberal financial market’ which was supported by the Neoclassical Liberalism social economists. Among all these financial crises, the financial storm in East Asia, starting from the year of 1997, wreaked beyond doubt the greatest havoc on the Asia and the world economy as a whole, dragging down the ‘Asian tigers’ (Thailand, Malaysia, Indonesia, Philippine, Hong Kong, Korea, Taiwan and Singapore) from the peak of the glorious ‘Economic Miracle’ in the past few years. Because of the severity and contagion of the East Asia Crisis, important questions have been raised such as the causes of the crisis, the role of the International Monetary Fund (IMF), and the financial architecture of international capital markets. As one of the most important international organizations, IMF has its great impact on the world economy. In this paper, the influence of IMF before the eruption of the crisis and its role in the recovery of East...
Words: 2781 - Pages: 12
...role for markets and for the state as drivers of development. Underlying these views were practicalities that shaped the way countries dealt with their need for foreign capital, the management of the macroeconomy, and their responses to economic and financial crises. There was a prominent role for the so-called Bretton Woods institutions, namely, the World Bank and the International Monetary Fund, in shaping prevailing views of development and putting them into practice. This Danny Leipziger The Role and Influence of IFIs has been important, both directly and indirectly, in affecting policy choices made by developing country governments over past decades. Keywords: Bretton Woods Institutions; World Bank ideology toward development; IMF ideology and development; changing development paradigms; international financial institutions; Bank-Fund Collaboration; Bank-Fund Concordat. Chapter 49 Page 2 Danny Leipziger The Role and Influence of IFIs Introduction International financial institutions (IFIs) have strongly influenced development thinking and practice in recent decades. IFIs have exerted direct influence thorough the volume of their financial transfers, and indirectly, for example, through their impact on the resource transfers of others, including donors and the private sector. Even more important, IFI analysis and ideas have dominated aspects of development strategy and ideology. This chapter discusses the Bretton...
Words: 8605 - Pages: 35
...Table of contents Introduction 2 Country Overview 2 The Political Environment 3 Recent History 3 The Present Government 3 Political Stability 4 Opposition Parties 4 Economic and Financial Analysis 5 Trade History & Major Products 5 GDP Growth per capita 5 Unemployment & Price level Changes Inflation 6 Exchange Rate Innovations 7 Investments in the Stock Market 7 Investments in the Bond Market 8 Foreign Exchange Reserves 9 Structure of Industries 10 The Banking System 10 Monetary Policy / Money Supply Growth 11 Foreign Debt 12 Capital Flight 12 Asian Currency Crisis 13 Philippines before the crisis 13 What caused the Asian Currency Crisis? The effect it had on the Philippines and other countries 13 Looking into the Future 17 Prevention as the Best Form of Management 17 Some Policy Lessons From the Asian Crisis 17 Need for Great Caution About Financial Liberalization and Globalization 17 Manage External Debt Well and Avoid Large Debts 17 Manage and Build Up Foreign Reserves 17 The Need for Capital Controls and a Global Debt Workout System 18 Conclusion: Summary / Comments / Recommendations 19 Works Cited 21 Appendix A 23 Appendix B 24 Appendix C 25 Appendix D 26 Appendix E 27 Appendix F 28 Introduction The Philippines were ceded by Spain to the US in 1898 following the Spanish-American War. They attained their...
Words: 5809 - Pages: 24
...70A, South Jakarta, Indonesia. The Association of Southeast Asian Nations,[4] commonly abbreviated ASEAN ( /ˈɑːsi.ɑːn/ ah-see-ahn,[5] rarely /ˈɑːzi.ɑːn/ ah-zee-ahn),[6][7] is a geo-political and economic organization of ten countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand.[8] Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of regional peace and stability, and to provide opportunities for member countries to discuss differences peacefully.[9] ASEAN covers a land area of 4.46 million km², 3% of the total land area of Earth, with a population of approximately 600 million people, 8.8% of the world population. The sea area of ASEAN is about three times larger than its land counterpart. In 2010, its combined nominal GDP had grown to US$1.8 trillion.[10] If ASEAN were a single entity, it would rank as the ninth largest economy in the world. History ASEAN was preceded by an organisation called the Association of Southeast Asia, commonly called ASA, an alliance consisting of the Philippines, Malaysia and Thailand that was formed in 1961. The bloc itself, however, was established on 8 August 1967, when foreign ministers of five countries – Indonesia, Malaysia, the Philippines, Singapore, and Thailand – met at the Thai Department...
Words: 8221 - Pages: 33
...Pamphlet Series No. 53 Governance of the IMF Decision Making, Institutional Oversight, Transparency, and Accountability Leo Van Houtven INTERNATIONAL MONETARY FUND 2002 Pamphlet Series No. 53 Governance of the IMF Decision Making, Institutional Oversight, Transparency, and Accountability Leo Van Houtven INTERNATIONAL MONETARY FUND Washington, D.C. 2002 ISBN 1-58906-130-6 ISSN 0538-8759 August 2002 The views expressed in this pamphlet, including any legal aspects, are those of the author and should not be attributed to Executive Directors of the IMF or their national authorities. Cover design and typesetting: IMF Graphics Section Please send orders to: International Monetary Fund, Publication Services 700 19th Street, N.W., Washington, D.C. 20431, USA Tel.: (202) 623-7430 Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: http://www.imf.org Contents Preface ............................................................................................... List of Abbreviations ........................................................................ I. II. Introduction ........................................................................... Quotas and Voting Power in the IMF: A System That Calls for Greater Equity ................................................... Role of Quotas and the Debate on the Quota Formula............ Further Work Toward Correcting Distortions and Enhancing Equity in Voting Power .....................
Words: 31743 - Pages: 127
...Introduction: The financial crises are major disruptions in financial markets characterized by sharp declines in asset prices and firm failures (11). The global melt down of 2007-08, the Great Depression of 1929 and South Asian crises of 1997 tested the efficiencies of concerned regulatory authorities across the world. Financial crises moves like cyclone and spirals down to all connected economies (13). Whether financial crises emerges in the developed countries or in the developing countries, the history witnesses that it has invariably led concerned economies into deep recession, unemployment, loss of public confidence, domestic and international trade reversal and even capital flight. The regulatory authorities engaged in watching and monitoring health of concerned economies have to proactively respond to mitigate and resolve the crises. There could be different causes for financial crises such as ongoing double digit inflation / uncontrolled monetary expansion, unsustainable internal or external public debt, excessive credit booms, large capital inflows, large current account deficits, balance sheet weaknesses due to maturity mismatches of public debts, fall out of impracticable exchange rate mechanism followed and currency crises (3). The selection of ways and means of mitigating and resolving a financial crisis and accelerating economic recovery is dependent upon root causes leading to financial crises. The policy options selected by regulatory authorities may be...
Words: 6201 - Pages: 25
...Youssouf Diallo International Political Economics Critique of IMF Loan Conditionality What is Conditionality? Conditionality is most often associated with aid money. International organizations, such as the International Monetary Fund (IMF) and World Bank, or individual countries can use conditionality when lending money to another country. The donor country requires that the country receiving the funds adhere certain rules directing the use of funds (Investopedia, 2013). Conditionality in its broad sense covers both the design of IMF-supported programs—that is, the macroeconomic and structural policies—and the specific tools used to monitor progress toward the goals outlined by the country in cooperation with the IMF (IMF, 2013). Over time, the IMF has been subject to a range of criticisms, generally focused on the conditions of its loans. The IMF has also been criticized for its lack of accountability and willingness to lend to countries with bad human rights record. On giving loans to countries, the IMF makes the loan conditional on the implementation of certain economic policies. These policies tend to involve: * Reducing government borrowing - Higher taxes and lower spending * Higher interest rates to stabilize the currency. * Allow failing firms to go bankrupt. * Structural adjustment. Privatization, deregulation, reducing corruption and bureaucracy. The problem is that these policies of structural adjustment and macro-economic intervention often...
Words: 4061 - Pages: 17
...ASOSIASI PENGELOLA PUSAT BELANJA INDONESIA (INDONESIAN SHOPPING CENTRES ASSOCIATION) Retail Trends & Challenges Retail Trends ….. • The market – Huge and Changing • The shoppers – Socially Shopaholics • The challenges – Raising competition and raising cost of doing business Retail Trends ….. • The market – Huge and Changing • The shoppers – Socially Shopaholics • The challenges – Raising competition and cost Indonesia has it all ….. GDP Growth l Accelera>ng real GDP growth ► 4.5% in 2009, 6% in 2010, 6.2% in 2011 4th largest popula>on in the world with 235 m inhabitants Growing urbaniza>on Middle class(1) now represents over 40% of the popula>on vs. 25% 10 years ago Size of middle class has been growing strongly at a 7.5% CAGR over the last 10 years to reach 23 m households GDP per capita to reach USD3,000 by 2012, allowing for greater disposable income and faster modern retail growth l l l l l Growing Middle Class Popula>on l l Food Retail Industry l l ...
Words: 1892 - Pages: 8
...RETHINKING THE EAST ASIAN MIRACLE JOSEPH E. STIGLITZ AND SHAHID YUSUF Editors RETHINKING THE EAST ASIA MIRACLE JOSEPH E. STIGLITZ AND SHAHID YUSUF Editors A copublication of the World Bank and Oxford University Press i Oxford University Press Oxford • New York • Athens • Auckland • Bangkok • Bogotá • Buenos Aires • Calcutta • Cape Town • Chennai • Dar es Salaam • Delhi • Florence • Hong Kong • Istanbul • Karachi • Kuala Lumpur • Madrid • Melbourne • Mexico City • Mumbai • Nairobi • Paris • São Paulo • Singapore • Taipei • Tokyo • Toronto • Warsaw and associated companies in Berlin • Ibadan © 2001 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W., Washington, D.C. 20433, USA Published by Oxford University Press, Inc. 198 Madison Avenue, New York, N.Y. 10016 Oxford is a registered trademark of Oxford University Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Cover design and interior design by Naylor Design, Washington, D.C. Manufactured in the United States of America First printing June 2001 1 2 3 4 04 03 02 01 The findings, interpretations, and conclusions expressed in this study are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations...
Words: 190305 - Pages: 762
...Business Economics Contributors: Prof. Dr. S.S Haridas Prof. Bidhan Datta Prof. Kavita Ingale Prof. Neelkanth Athalye Prof. Dr. Manasi Gore Session Plan SR. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Business Economics (102) Topic Thinking like an Economist & Ten Principles of Economics Circular Flow, National Income, Measurement Identities Business cycle, Indian & Global Experience Types of Inflation (Demand Pull & Cost Push) Inflation & Unemployment Fiscal Policy and Monetary Policy Role of govt. in regulating economy and Recent experiences BOT, BOP & Foreign Exchange Mechanism Overall linkage in economy & Indian Experiences Demand/Supply/Market Equilibrium Elasticity Concept Application of Elasticity Consumer Choice, Utility, Indifference Curves Price, Income & Substitution Effect Law of Variable Proportion & Return to Scale Types of costs and Short Run costs and choosing optimum size of firm Cost Analysis, Long Run cost and cost minimization Perfect Competition Monopoly and Profit maximization Monopolistic Competition 21 Price Discrimination 22 23 24 Oligopoly & its applications Game Theory Revision Assignment 1: The implications of WTO membership for Indian economy in the last 10 years. Hints: Students are to think from the following angles: i) ii) iii) iv) v) vi) vii) Protection of Domestic industries Trade in agricultural products EX-IM policy Stability of currency ...
Words: 6875 - Pages: 28
...State Sovereignty and Regional * Institutionalism in the Asia Pacific Shaun Narine Working Paper No. 41, March 2005 * A revised version of the paper is scheduled to be published in The Pacific Review later this year. Recent Titles in the Working Paper Series No. 28 The Revolution in Military Affairs and Its Impact on Canada: The Challenge and the Consequences, by Andrew Richter, March 1999. No. 29 Law, Knowledge and National Interests in Trade Disputes: The Case of Softwood Lumber, by George Hoberg and Paul Howe, June 1999. No. 30 Geopolitical Change and Contemporary Security Studies: Contextualizing the Human Security Agenda, by Simon Dalby, April 2000. No. 31 Beyond the Linguistic Analogy: Norm and Action in International Politics, by Kai Alderson, May 2000. No. 32 The Changing Nature of International Institutions: The Case of Territoriality, by Kalevi J. Holsti, November 2000. No. 33 South Asian Nukes and Dilemmas of International Nonproliferation Regimes, by Haider K. Nizamani, December 2000. No. 34 Tipping the Balance: Theatre Missile Defence and the Evolving Security Relations in Northeast Asia, by Marc Lanteigne, January 2001. No. 35 Between War and Peace: Religion, Politics, and Human Rights in Early Cold War Canada, 1945-1950, by George Egerton, February 2001. No. 36 From Avignon to Schleswig and Beyond: Sovereignty and Referendums, by Jean Laponce, June 2001. No. 37 Advancing Disarmament in the Face of Great Power Reluctance: The Canadian Constitution...
Words: 12271 - Pages: 50
