... 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 of the government's decision to no longer peg the local currency to the U.S. dollar. Currency declines spread rapidly throughout South Asia, in turn causing stock market declines, reduced import revenues and even government...
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...The Asian Economic Crisis The Asian Economic Crisis of 1997 was a regional debacle that stirred and involved practically the rest of the world. It was a unique economical situation that no one expected or suggested. The southeastern Asian countries, such as Thailand, South Korea and Indonesia were financially sound and satisfied all the criteria that economists proclaimed necessary to maintain order and progress. However, economists and the rest of the world did not see the breaches in the economy and realize the affect those considerations would have in the exacerbation of an entire region. The purpose of this essay is to explain what the Asian Economic Crisis was, the causes, consequences, and how the world went about resolving the issue to bring this region to where it is today. The 1990s was a decade of enormous growth in Southeast Asia sustained by its exporting (Noble, 1). It was commonly known as the Asian economic miracle. Macroeconomic balances were relatively steady and inflation was under control in these Asian countries, like Thailand, Indonesia and Singapore. Because of the major progress and developments in these countries, it became an attractive location for foreign investment. Technology had reached a new brink, where people could invest internationally without having to leave the country and establish a huge investment abroad. Trading through the internet was easy, efficient and convenient. Capital Inflow into these countries was inundating the...
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...on U.S. Industry: An Almost-Free Lunch? • The large devaluations experienced by Korea, Malaysia, Thailand, and Indonesia beginning in the summer of 1997 raised concerns that imports from these countries would soar while demand for U.S. exports weakened, causing U.S. industries to suffer. W • As it turned out, manufactured imports from the four countries rose only slightly, and the decline in U.S. exports was not large enough to have a significant effect on trend output for most industries. • The one exception to this pattern was the steel industry: there, sharply rising imports and falling exports led to a drop in output and prices. • Overall, the United States enjoyed an “almost-free lunch” in the wake of the Asia crisis. Cheaper imports benefited consumers, and domestic production and employment were largely unhurt. hen the Asia crisis erupted in the summer of 1997, many forecasters predicted that one effect would be an end to the economic boom in the United States. Surely, it was argued, the drop in demand for U.S. exports combined with surging import volumes would finally be enough to slow the U.S. economy. It did not happen. Indeed, the Asia crisis’ overall effects on the United States were small.1 In terms of trade flows, total manufactured imports from the Asian countries affected by a currency collapse—Indonesia, Korea, Malaysia, and Thailand, which I will refer to as the “Crisis 4” countries—grew only slightly, while exports to these countries fell...
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...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 abrupt declines in their history with drops of around 10%, triggered moments after the collapse of Lehman Brothers hit the U.S. financial markets. Even the Bursa Malaysia KLCI was not spared, dropping to its lowest point in...
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...The Financial Crises in Russia and East Asia: How the World Bank can Help. 1 - Overview of Asian financial crisis On July 2, 1997, the Government of Thailand abandoned its efforts to maintain a fixed- exchange rate – the Baht had been pegged to a basket of currencies dominated by the U.S. dollar – and allowed the Baht to float. This Baht quickly depreciated, falling 18% on the first day alone. The collapse of the Thai Baht was followed by speculative attacks on other countries’ currencies (including the Indonesian Rupiah, the Malaysia Ringitt, the Philippine Peso, and the Korean Won) and to a further round of forced devaluations. The collapse of fixed exchange rates was accompanied by a series of more general financial sector crises in several of these countries. Although the precise details vary, the immediate cause appears to be a mismatch between assets and liabilities in the corporate and banking sectors (in both currency and term length) and a sharp decline in asset values. These immediate problems were exacerbated by general financial sector weakness due to inadequate supervision and rampant insider lending. In many ways the crises in Asia were somewhat different than previously observed exchange rate crises. Corsetti, Pesenti and Roubini (1998) note that several of the usual indicators of a pending financial crisis – slow growth, large fiscal deficits, high rates of inflation and low savings and investment rates – were not observed in these...
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...beginning in July 1997 and raised fears of worldwide economic meltdown due to financial contagion.1 Several countries such as Malaysia, Thailand, Indonesia, the republic of Korea and the Philippines were hit directly while others such as Taiwan province of China, Singapore and especially Hong Kong, China were badly affected. What began as a speculative attack on the Thai baht in July 1997 quickly spread as ‘contagion’ to the other countries. Over a three-month period between July and October 1997, the baht fell nearly 40 per cent, the Malaysian ringgit and Philippine peso by about 27 per cent, the Indonesian rupiah by about 40 per cent and the Korean won approximately 35 per cent against the United States dollar. For countries that had been dubbed “miracle economies” this was a serious blow with wide-ranging economic, social and political ramifications.2 In this paper we would try to undertake an empirical analysis of the factors leading to the crisis by analysing on two major points: 1) How have these countries performed in the years leading to the crisis? 2) What was the policy response to the currency crisis and what similarities/differences were there in policy responses across countries? We try to do this by analysing the macroeconomic data of three countries, Malaysia, Thailand and the Republic of Korea, over a 13-year period, from 1990 to 2002. The 13-year period is divided into three time segments. The period 1990-1996 is the pre-crisis period, 1997 and 1998 is considered...
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...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. Indonesia’s per capita income declined by 10.4%. In other words, the damage the exchange rate crisis did to the Southeast Asian economies is serious enough that utmost attempts must be made to prevent its recurrence. However, should there be another massive speculative attack on the exchange rate, and should external help be required, where could these countries turn to? ∗ This article is...
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...Socialist Republics after Japan’s unconditional surrender during WWII; the Republic of Korea (ROK) had gone throughout drastic changes in its social, economic, and political structure, but in the 1960s, under the regime of Park Chung Hee, the Korean government implemented measures to increase export and decrease the import of foreign goods and at the same time nationalized banks, and persecuted South Korean business leaders for profiting from the corruption in the South Korean government. During this period South Korea woke up to a dawn of industrial revolution that changed the economic future of the Peninsula. Park started what would take the ROK from a agricultural economy, to one of the world’s largest economies. Although the Japanese government had put in place some infrastructure to developed the Korean Peninsula during the Japanese occupation from 1890’s to 1945, these infrastructures were solely for Japan benefit. “Many economists think it developed into the world’s 11th largest economy by following the model of the world’s second largest economy just next door – Japan.” (Korea, 2001). Park’s administration developed and adapted the Japanese economic system they had introduced in South Korea since the 1920, the “Zaibatsu”. The Korean version is called “Chaebol” which means “business conglomerate”. The Japanese Occupation...
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...Bibliography 15 I. Introduction 1.1 Geographic location in Asia Totaling 513,120 km² Thailand is the world's 51st-largest country by total area. 1.2 Economy of Thailand Thailand is an emerging economy and considered as a newly industrialized country.It exports an increasing value of over $105 billion worth of goods and services annually.> Thai rice, textiles and footwear, fishery products, rubber, jewellery, cars, computers and electrical appliances. Its Substantial industries are : electric appliances, tourism (6%), sex tourism and prostitution…It also has a GDP worth US$602 billion. This classifies Thailand as the 2nd largest economy in Southeast Asia, after Indonesia.It is the 4th richest nation according to GDP per capita, after Singapore, Brunei and Malaysia. Finally the IMF has predicted that the Thai economy will rebound strongly from the low 0.1% GDP growth in to 7.5% in 2013 thanks to the accommodative monetary policy of the Bank of Thailand and the actual policy. 1.3 Demographic Thailand is approximately 67.5 million people, with an annual growth rate of about 0.3 percent. In addition to Thai, it includes ethnic Chinese, Malay, Lao, Burma, Cambodia, and Indians, among others. About the...
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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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...PAUL KRUGMAN WINNER OF THE NOBEL PRIZE IN ECONOMICS THE RETURN OF DEPRESSION E C O N O M CS AND T H E C R I S I S OF I 2 0 0 8 ISBN 9 7 8 - 0 - 3 9 3 - 0 7 1 0 1 - 6 W USA $24.95 CAN. $27.50 hat better guide could we have to the 2008 financial crisis and its resolution than our newest Nobel Laureate in Economics, the prolific columnist and author Paul Krugman? In his prescient 1999 classic, The Return of Depression Economics, Krugman surveyed the economic crises that had swept across Asia and Latin America and pointed out that they were a warning for all of us: like diseases that have become resistant to antibiotics, the economic maladies that caused the Great Depression were making a comeback. In the years that followed, as Wall Street boomed and financial wheeler-dealers made vast profits, the international crises of the 1990s faded from memory. But now depression economics has come to America. When the great housing bubble of the mid-2000s burst, the U.S. financial system proved as vulnerable as those of developing countries caught up in earlier crises—and a replay of the 1930s seems all too possible. In this new, greatly updated edition of The Return of Depression Economics, Krugman shows how the failure of regulation to keep pace with an increasingly out-of-control financial system set the United States and the world up for the greatest financial crisis since the 1930s. He also lays out the steps that must be taken...
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...| | | Thai people who originally lived in southwestern China migrated into mainland Southeast Asia over a period of many centuries. The oldest known mention of their existence in the region by the exonym Siamese is in a 12th-century A.D. inscription at the Khmer temple complex of Angkor Wat in Cambodia, which refers to syam, or "dark brown", people.[1] It was believed that Siam derived from the Sanskrit word syam, or "brown race", with a contemptuous signification. Sien in Chinese writings is the name for the northern kingdom that centered around Sukhothai and Sawankalok; but to the Siamese themselves, the name of the country has always been Mueang Thai.[2] The country's designation as Siam by Westerners likely came from the Portuguese, the first Europeans to give a coherent account of the country. Portuguese chronicles noted that the king of Sukhothai had sent an expedition to Malacca at the southern tip of the Malay Peninsula in 1455. Following their conquest of Malacca in 1511, the Portuguese sent a diplomatic mission to Ayutthaya. A century later, on 15 August 1612, The Globe, an East India Company merchantman bearing a letter from King James I, arrived in "the Road of Syam".[3] "By the end of the 19th century, Siam had become so enshrined in geographical nomenclature that it was believed that by this name and no other would it continue to be known and styled."[4] Indianized kingdoms such as the Mon, Khmer and Malay kingdoms had ruled the region. Thai people established...
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...O C C A S I O N A L PA P E R 178 IMF-Supported Programs in Indonesia, Korea, and Thailand A Preliminary Assessment Timothy Lane, Atish Ghosh, Javier Hamann, Steven Phillips, Marianne Schulze-Ghattas, and Tsidi Tsikata INTERNATIONAL MONETARY FUND Washington DC 1999 © 1999 International Monetary Fund Production: IMF Graphics Section Typesetting: Alicia Etchebarne-Bourdin Cataloging-in-Publication Data IMF-supported programs in Indonesia, Korea, and Thailand : a preliminary assessment / by Timothy Lane . . . [et al.]. — [Washington DC : International Monetary Fund], 1999. p. cm. — (Occasional paper, 0251-6365); no. 178 Includes bibliographical references. ISBN 1-55775-783-6 1. Indonesia—Economic policy. 2. Korea—Economic policy. 3. Thailand—Economic policy. 4. International Monetary Fund—Indonesia. 5. International Monetary Fund—Korea. 6. International Monetary Fund—Thailand. I. Lane, Timothy D. (Timothy David), 1955- II. Occasional paper (International Monetary Fund); no. 178. HC447.I44 1999 Price: US$18.00 (US$15.00 to full-time faculty members and students at universities and colleges) Please send orders to: International Monetary Fund, Publication Services 700 19th Street, N.W., Washington, D.C. 20431, U.S.A. Tel.: (202) 623-7430 Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: http://www.imf.org recycled paper Contents Preface I Overview Timothy Lane and Marianne Schulze-Ghattas References II Background to the Crisis Javier Hamann...
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...American University in Bosnia and Herzegovina International Finance and Banking BSAD 120 Principle of Banking GROUP PROJECT Financial Crises: Asia 1997 and Global Recession 2008 Group members: Professor: Vesna Plakalovic Faris Njemcevic Ibrahim Music Avdo Halilovic Sabit Ceho 1. Explain both crises in your own words As for the Asian crisis which has occurred in year 1997/1998 we can say that something that looked really small, and not important has impacted most of the Asian countries but the World as well. As for the crisis beginning, we can say that it has begun in the Thailand. Problems started in the USA where was a lot of loans and credits that lead towards the collapse and bankruptcy of most of the banks and financial institutions in the USA. Looking for the investment and good return of investments, Americans banks and investors have decided that the Middle East and Asian countries are perfect investing area. When American companies started to invest into Asian countries like Thailand ,which has really low GDP and standard of life, big money income into poor countries it has only one possible outcome. GDP in Thailand and other surrounding countries started to appreciate really fast which was almost uncontrollable. Problem was that many experts have noticed and put a warning on ,was that GDP...
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...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...
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