The Asian Currency Crisis

Paper Summary:

The paper discusses the primary explanations for the 1997 Asian currency crisis and highlights the implications of that crisis for the Asian economic paradigm.

Outline:
1985 - Plaza Accord (Appreciation of Yet Against Dollar)
Liberalization (Bank of Japan, Foreign Loans)
Kieretsu - Export of Capital
End of Bubble Economy
Foreign Banks Lending Expands
1988 -Gsp Status Ends (4 Tigers Economy)
1994 - China: Devaluation of Currency
1995-96 -Mini-Recession, Debt Problem, Accumulation
1996-97 - Debt/ Foreign Exchange, Reserve Rations Deteriorate
1997 July 2nd - Currency Crisis Expands From Thailand into East
Aian Countries
Explanation of the Asian Crisis

From the Paper:

"Following the Plaza Accord the Bank of Japan was characterized by liberalization and specifically in the area of foreign loans and as well the Bank of Thailand followed the same course in lending. Entrepreneurs in Asia are noted in the work of Wong entitled: "Lessons from the Asian Financial Crisis relates that Asians are known to place a general trust in their governments for enactment of economic policies which are sound and "their failure to sense the dangers of borrowing short in foreign currency and investing in long-term projects with earnings denominated in local currency was disastrous." (Wong, nd) In July 1997 Thailand "ran out of foreign reserves and devalued the baht which lost over 1/2 of its value. Having admitted the total loss of foreign reserves, there was a run on the bank of Thailand and this quickly spread to Malaysia, Indonesia, the Philippines, South Korea, Singapore and Taiwan. Attempts of the International Monetary Fund to assist these countries was not successful with too small a bailout package at too late of a date."

Sample of Sources Used:

• Banking System Developments in the Four Asian Tigers (1997) Economic Research and Data. Federal Reserve Bank of San Francisco. 8 Aug 1997. Online FRBSF Economic Letter. Available at: http://www.frbsf.org/econrsrch/wklyltr/el97-22.html
• Barro, Robert J. (1998) The East Asian Tigers Have Plenty to Roar About. Economic Viewpoint Business Week 27 Apr 1998. Online available at: http://www.economics.harvard.edu/faculty/barro/files/bw98_04_27.pdf
• Hughes, Christopher W. (1999) Japanese Policy and the East Asian Currency Crisis: Abject Defeat or Quiet Victory. 1999 February Online available at: http://www2.warwick.ac.uk/fac/soc/csgr/research/workingpapers/1999/wp2499.pdf
• Hughes, Christopher W. (1999) Japanese Policy and the East Asian Currency Crisis: Abject Defeat or Quiet Victory. CSGR Working Paper No. 24/99. February 1999. Online available at: http://www2.warwick.ac.uk/fac/soc/csgr/research/workingpapers/1999/wp2499.pdf
• Johnson, Chalmers (1998) Economic Crisis in East Asia: The Clash of Capitalism. Cambridge Journal of Economics 1998, 22.

More papers on The Asian Currency Crisis:

• Cause and Effect Essay # 110398 : "The Asian Currency Crisis"
• Research Paper # 9154 : "The Asian Financial Crisis of 1997"
• Comparison Essay # 102383 : "The Asian Financial Crisis"

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