The Asian Economic Crisis

Paper Summary:

This paper explores the causes of the Asian economic crisis in 1997 and traces the roots of the crisis back to the area's economic growth that started in the early 1990s. The paper explains that, while the crisis is believed to have begun in Thailand, conditions that existed throughout the region contributed to the destabilization of the economies of the other Southeast Asian countries as well.

From the Paper:

"Throughout the early 1990s, growth in southeast Asia attracted much foreign capital. However, by 1995 and 1996, Thailand's current account deficit had grown (from 5.7% in "93 to 8.5% in "96 [Pesenti et al., 1998]). When domestic production slowed, this account imbalance represented an even greater percentage, when compared to GDP. Much of the instability in Thailand's economy was brought about by heavy short-term borrowing that required stringent debt maintenance. A boom in real estate and the Thai stock market attracted foreign speculation that could not be sustained in the face of investor doubts. The Thai government attempted to shore up shaky investor confidence by officially backing the financial institutions that were heavily indebted abroad."

More papers on The Asian Economic Crisis:

• Research Paper # 1425 : "The Problems of Project Finance in American Business after the Asian Economic Crisis of 1998"
• Cause and Effect Essay # 64399 : "The Asian Economic Crisis"
• Cause and Effect Essay # 2808 : "Causes of the Asian Financial Crisis"

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