Case

Case Name: South East Asian Economic Crisis An economic crisis, which erupted in Thailand in mid-1997 and which soon spread to neighbouring countries—Malaysia, Indonesia, Philippines and South Korea— came to be popularly referred to as South-East Asian economic crisis (although South Korea is in East Asia and only the other countries are in South East Asia). A currency Crisis shows up when there is a speculative attack on the exchange rate, resulting in a devaluation of a pegged currency or sharp depreciation of floating currency. When currency crisis occurs the domestic monetary authorities usually lose large amounts of their international reserves and/or raise interest rates vary sharply in order to tray to discourage capital outflows. A banking Crisis occurs because depositors lose confidence in the solvency of banks and attempt to withdraw their deposits, thereby causing r run on the banks. Alternatively, it may occur because banks make so many bad loans and investments that they become insolvent without any depositors’ panic. In either case, banks are forced to close or seek financial support from their governments. Failure of one small bank might not produce a crisis, but failure of a bank that has large share of deposits would, as would failure of a number of banks at the same time. Systemic Financial Crisis: The third type if financial crisis involves severe disruption in domestic financial markets that hampers the working of the real economy. Such a crisis is harmful to real activity because it disrupts the payment system and leads to a breakdown of all those markets that channel funds from savers to borrowers. Banking and currency crisis may be components of a systemic financial crisis, but this is something bigger the earlier of these two, involving equity and bond markets as well as money market institutions. Foreign Debt Crisis: The final type of crisis arises when one or more countries find that they are unable to keep up the interest payments on