Asian Financial Crisis
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The Asian Financial Crisis
The Asian Financial Crisis was a period of financial crisis that took place in the majority of the Asian countries beginning in July 1997. This was serious because it raised fears of a worldwide economic meltdown.
The crisis started in Thailand with the financial collapse of the Thai baht caused by the Thai government when it decided to float the baht, cutting its peg to the US dollar. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.
Though there has been general agreement on the existence of a crisis and its consequences, what are less clear are the causes of the crisis, as well as its scope and resolution. Indonesia, South Korea and were the countries most affected by the crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The People’s Republic of China, India, Taiwan, Singapore, Brunei and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.
Foreign debt-to-GDP ratios rose from 100% to 167% in the four large ASEAN (Association of Southeast Asian Nations) economies in 1993–96, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13 to 21% and then as high as 40%, while the other Northern NIC’s (Newly Industrialized Countries) fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.
Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to...
The Asian Financial Crisis was a period of financial crisis that took place in the majority of the Asian countries beginning in July 1997. This was serious because it raised fears of a worldwide economic meltdown.
The crisis started in Thailand with the financial collapse of the Thai baht caused by the Thai government when it decided to float the baht, cutting its peg to the US dollar. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.
Though there has been general agreement on the existence of a crisis and its consequences, what are less clear are the causes of the crisis, as well as its scope and resolution. Indonesia, South Korea and were the countries most affected by the crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The People’s Republic of China, India, Taiwan, Singapore, Brunei and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.
Foreign debt-to-GDP ratios rose from 100% to 167% in the four large ASEAN (Association of Southeast Asian Nations) economies in 1993–96, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13 to 21% and then as high as 40%, while the other Northern NIC’s (Newly Industrialized Countries) fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.
Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to...