... 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 Asia economy will be presented...
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...Financial crises have been an unfortunate part of the industry since its beginnings. A look at a number of financial crises over the last 30 years suggests a high degree of commonality: excessive exuberance, poor regulatory oversight, dodgy accounting, herd mentalities and, in many cases, a sense of infallibility. 1) LatAm sovereign debt crisis – 1982 : This crisis developed when Latin American countries, which had been gorging on cheap foreign debt for years, suddenly realized they could not repay it. The main culprits, Mexico, Brazil and Argentina, borrowed money for development and infrastructure programmes. (causes ) Their economies were booming, and banks were happy to provide loans to the point where Latin American debt quadrupled in seven years. When the world’s economy went into recession in the late 1970s the problem compounded itself. Interest rates on bond payments rose while Latin American currencies plummeted. The crisis officially kicked off in August 1982 when Mexico’s finance minister Jesus Silva-Herzog said the country could not pay its bills. (how they overcome) It took years to sort out the crisis, with Latin American nations eventually turning to the IMF for a bailout in exchange for pro-market reforms and austerity programmes. It also led in 1989 to the novel creation of Brady bonds, which were designed to reduce debt in these countries by converting distressed sovereign debt into a number of different types of bonds. Furthermore, banks could exchange...
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...5 Abstract This paper investigates the impact of real interest rate on national saving in five Association of Southeast Asian Nations (ASEAN) of Indonesia, Malaysia, the Philippines, Singapore and Thailand. We analyze impact real interest rate to nation saving for ASEAN starting 1991-2013. Through an analysis from Excel, real interest rate is found to have significant impact on national saving during different stage of economic. Extensions using a graph reveal the impact of real interest rate in ASEAN-5 and thus mainly reflect heightened concerns to national savings amid the Asian financial crisis and the global financial crisis. Keywords: real interest rate, national saving, financial crisis 1.0 Introduction The world’s average saving rate has been declining since the first oil shock and through the early 1990s. However this trend conceals a large and increasing dispersion of saving rates, particularly among developing countries. The large heterogeneity in saving behavior is associated to country and time differences in levels of development, growth performance, and fiscal and financial policies. The level of real interest rates has once again become the focus of policy makers' concerned. To understanding the response of national saving to changes in interest rates is central to many issues in economic policy. For example, a reduction in the budget deficit would probably cause interest rates to decline. If personal saving declined as a result, the overall increase...
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... 1 Asian Contagion 1 Emerging Market Crises 3 Meltdown in Thailand 7 The International Monetary Fund 9 Implication for Business 11 Malaysia 13 Preventing and Managing Future Crises 14 Conclusion 16 References 18 Introduction Asian Contagion In March 1997 Asia faced a serious crisis in financial sector. This concern was started from Thailand and has spread to a lot of countries in Asia. Obviously it affected to those countries in economy situation such as currency value. Also called the "Asian Contagion", this was a series of currency devaluations and other events that spread through many Asian markets beginning in the summer of 1997. The currency markets first failed in Thailand as the result...
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...RESEARCH PAPER 99/14 11 FEBRUARY 1999 The Asian Economic Crisis This paper considers the economic crisis that began in the financial markets of South East Asia in 1997 and the consequences for the economies of the region and the rest of the world. The paper provides a chronology of and explores the factors that led to the crisis. An overview is given of the policy measures that the international financial institutions (IFIs), such as the IMF, have taken to deal with the crisis. Some of the arguments and policy proposals made to try to avoid future crises are also covered. Eshan Karunatilleka ECONOMIC POLICY AND STATISTICS SECTION HOUSE OF COMMONS LIBRARY Recent Library Research Papers include: 98/119 98/120 99/1 Unemployment by Constituency - November 1998 Defence Statistics 1998 The Local Government Bill: Best Value and Council Tax Capping Bill No 5 of 1998-99 16.12.98 22.12.98 08.01.99 99/2 99/3 99/4 Unemployment by Constituency - December 1998 Tax Credits Bill Bill 9 of 1998-9 The Sexual Offences (Amendment) Bill: 'Age of consent' and abuse of a position of trust [Bill 10 of 1998-99] 13.01.99 18.01.99 21.01.99 99/5 99/6 99/7 The House of Lords Bill: 'Stage One' Issues Bill 34 of 1998-99 The House of Lords Bill: Options for 'Stage Two' Bill 34 of 1998-99 The House of Lords Bill: Lords reform and wider constitutional reform Bill 34 of 1998-99 28.01.99 28.01.99 28.01.99 99/8 99/9 99/10 99/11 99/12 Economic Indicators Local Government...
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...Mexico Overall, Mexico is the second largest economy in Latin America after Brazil and is also an oil-exporting nation. Mexico realized that trade is one of the most important factor that driven Mexico economy, this country started free trade in a early time and continue participates lots of free trade agreements for decades. Based on the data that I have downloaded from work bank(2017), GDP per capita are: 7236.6 in 1990, 7277.6 in 1995, 8568.1 in 2000, 8706.1 in 2005 and 8861.5 in 2010. From that, we can see that economy develop in Mexico is increasing but modest in general. Since 1994, Mexico participated NAFTA and thought that agreement would boost Mexico’s growth and economy development. However, the economy performance was not going...
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...Session 2013/2014 Prof Dr. K. Kuperan Viswanathan SHORT PAPER #1 INTERDEPENDENCE OF WORLD FINANCIAL MARKETS AND FOREIGN EXCHANGE FLUCTUATIONS Submitted by: ZAHARIN BIN ALI MATRIC No. 95906 June 14, 2014 Short Paper #1 Page |2 1. INTRODUCTION With the increase in advancements in transportation and communications made possible by technology, the world has seen exponential growths in economic ties among all nations. In the last few decades, globalization has resulted in a rapid surge in the interchanging of goods and services reaching across further and faster beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime crises on the world economies have provided evidence of global financial markets interdependence. Many international stock markets, for example, experienced their worst...
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...| 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...
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...THE ECONOMIC DIMENSIONS OF GLOBALIZATION CHAPTER 2 Chapter 2 The economic dimensions of globalization While the globalization process is a complex and multidimensional phenomenon, some of its most visible and influential aspects are economic in nature. This chapter contains an analysis, from a global standpoint, of major trends in trade, investment, finance, macroeconomic regimes and international labour mobility. This analysis covers a long period in history, from the last quarter of the nineteenth century to the present, and is structured according to the successive phases of globalization identified in the preceding chapter. The first section focuses on the development of trade and investment flows among the principal regions of the world, with emphasis on the variable relationship between the expansion of trade and economic growth, the emergence of integrated production systems underpinning the operations of transnational corporations, the primary challenges faced by developing countries as a result of these global trends and the creation of an international institutional framework in the area of trade. The second section contains an analysis of the most important changes that have taken place in international finance and macroeconomic regimes. After reviewing major historical developments in this area, the study focuses on the volatility and contagion which have characterized capital flows in the third phase of globalization, and finally analyses the magnitude and...
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...(IMF) in the East Asian Debt Crisis of 1997 By Yaro Sadek Tahirou Minnesota State University, Mankato 2 ABSTRACT During the East Asian Financial crisis in particular, the IMF has been criticized of promoting international cooperation because of the supervised enforcement of its rules. The purpose of this research is to find out how the IMF responded to the East Asian debt crisis and whether or not its responses were the best possible responses to this crisis. Through my research, I talked about the causes of the East Asian financial crisis, the role of the IMF in the international monetary system, and if the IMF responses to Thailand, South Korea and Indonesia were the best responses or not. After analyzing the IMF responses in this crisis, I found that the IMF policies need to be reformed in order to monitor and prevent future financial crises spill-over effects at the global and regional levels. I will analyzed 5 scholarly journals on the financial crisis in East Asia, 3 scholarly articles on the role of IMF in the East Asia financial crisis, and 1 novel called POLITICS IN SOUTHEAST ASIA DEMOCRACY OR LESS by William Case. INTRODUCTION Several financial crises have occurred in the world economy through the last decades. Some examples include the East Asian financial Crisis of 1997, the Latin American debt crisis of 1994-95, the Russian crisis of 1998, and the Brazilian crisis of 1998-99 which spread out to other areas also known as the “contagion effect”. During these...
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...of the worst economic crisis in its history, which is called "The Peso crisis" or "Tequila Crisis" and is considered one of the first ones that had global effects. After only three weeks in charge, the newly elected President Ernesto Zedillo Ponce de León was forced to lift the upper band of the exchange rate by 15%, devaluating de facto the Mexican currency. In fact, the Central Bank of Mexico had insufficient international reserves to keep the fixed exchange rate with the US dollar. This triggered panic among Mexicans, who started buying dollars because they were fearing that further and more serious devaluations would occur. This contributed to exacerbate the situation even more. The crisis was very harsh, but thanks to a US$50b rescue package from USA, the IMF, the Bank for International Settlements and private commercial banks, Mexico was able to roll over its short term dollar denominated debt and did not default on its short term securities. As it results from the following data, Mexico managed to recover very quickly: * The GDP decreased by 5.8% in 1995, but in 1996 and in 1997 it grew by 5.9% and 7.0% respectively * Household final consumption expenditure contracted by 11.5% in 1995, but in 1997 it went back again to 1994 level * Foreign direct investments decreased by 13% in 1995 and by 4% in 1996, but they grew by 40% in 1997 to a level 16% higher than in 1994 * Unemployment rate grew by almost 3 percentage points, but in 1997 it was lower than in 1994 ...
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...Introduction: The purpose of this report is to consider The Russian Crisis of 1998. What events led to this crisis, how it affected ordinary citizens and the effect it had on the world capital markets. We will also discuss the role IMF and other countries played in helping with the crisis. What the Russian government did in order to stabiles the situation and what role politics played in the process. We will use a number of sources in order to complete this report. Question One: What event is recognised as the beginning of the crisis? The Russian crisis begun on August 17th 1998 when the central bank of Russia announced that it would widen the intervention bands from ruble. It meant that the ruble was allowed to fluctuate against dollar. As a result, the exchange rate of the ruble fell steadily which led to a collapse in Russia economy. However, the crisis was not caused by a single event. It was a consequence of a continuing downward trend in Russia economy since its economic reform in 1991. The crisis’s seeds were sown from that day. The main causes of this crisis could be divided into 3 timelines: * Period 1991 – 1996: In 1991, Russia changed from a very strictly centralized economy to a market economy. Up until then, the Soviet played the most important role in subside all the state sectors. It consumed one-third of GDP and supported at least every third man, woman, and child (Roman, G & Robin, M – 1999). When the real prices were introduced, these state sectors...
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...Research Assignment: “Asia’s performance during the global financial crisis has highlighted its flexibility. This flexibility, in part, arises from transformations undertaken in response to the Asian financial crisis a decade earlier.” Student Name: Eric Rodrigues Student Name: Mehmet Edib Unal Introduction The Asian Financial Crisis occurred during the year 1997-1998, and is explained well in brief by Galina Hale “East Asian countries experienced severe banking crises. Nonperforming loan ratios skyrocketed because of prior excessive risk taking and most banks had to be recapitalized by their governments.” (Hale 2011, p.3) After ten years, The Asian Financial Crisis was followed by The Global Financial Crisis in 2008. “The precise genesis of the global crisis remains subject to debate. (Lin 2012, Treichel 2012, p.3) “We will argue that global imbalances were the result of the large excess demand in the U.S. over an extended period—the financing of which was made possible by the reserve currency status of the US dollar. “This excess demand resulted from both the public debt” and “the overconsumption by households.” (Lin 2012, Treichel 2012, p.3) “As shock waves of the global financial crisis (GFC) reached East Asia in autumn 2008 immediately after the collapse of Lehman Brothers in September, the region faced the task of evaluating and reassessing the economic cooperation efforts of the previous ten years” (Katada 2011, p.274) Thus by evaluating and reassessing...
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...R e se a rc h a n d Stat i s t i c s B r a n c h working paper 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION RESEARCH AND STATISTICS BRANCH WORKING PAPER 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries Peter Wad Copenhagen Business School UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna, 2010 This paper was prepared by Peter Wad, UNIDO consultant and backstopped by Nobuya Haraguchi, UNIDO staff member, Research and Statistics Branch, Programme Coordination and Field Operations Division. Iguaraya Saavedra provided administrative support. The designations employed, descriptions and classifications of countries, and the presentation of the material in this report do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. The views expressed in this paper do not necessarily reflect the views of the Secretariat of the UNIDO. The responsibility for opinions expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO. Although great care has...
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...D December 1, 2012 International Crisis in Lending Lessons to be learned Group V Samantha Jeffrey Gabriella Stankovic Na-taisha Williams The debt crisis played a huge role in international lending. This report will discuss how economic crisis can result from many different factors such as changes in government policies which result in failure, and the cost of bank bailouts. Least developing countries also learned a lesson about how interest rates and low exports and imports played a major role in the financial crisis. These countries also tried to stabile their country's currency by fixing its exchange rate to that of the United States, which also resulted in failure. European countries also integrated their currency to Euro that caused a major crisis in lending. All are major factors that contributed to a crisis in international lending. Countries need to know what they are doing wrong before they can solve their problems. The historical events discuss will help serve as answer of how it can be resolved. Sovereign risk is the risk of lending money to the government with the risk of not being able to repay the obligation. There is always a risk in lending but the previous debt crisis and the crisis that is occurring in Europe plays a role in whether financial institutes want to lend to governments. The sovereign risk is important in international lending because many countries borrow money...
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