Similarittes Between Asian Financial Crisis, Eu Crisis, Us Financial Crisis and Latam
A common feature of all the financial crises is that the financial instability and a highly leveraged private sector created a financial boom which finally led to the bubble and subsequently to the bust.
1. Financial instability
In EU crisis and US financial crisis cases the banking sector was hit hardest and accelerated the crisis through a credit crunch and credit crisis. Whereas in the US this process was driven by a real estate boom and the issuance of complex securities (as bad assets), in the EU the treasury bonds of the periphery states were playing the role of the bad securities that became a problem for the banking system. In these cases a relatively unregulated banking system became the amplifier of the boom as well as the bust. Though the EU crisis is still evolving it appears to take a similar path as in the US. Whereas in the US the monetary and fiscal policy came to the rescue, this will be much harder to achieve in a less unified EU with limited power of the Central Bank, the heterogeneous fiscal policies of the countries and the fragmentation of the banking regulations. But predictions are difficult in particular if it concerns the future. In the case of the EU, a still growing world economy may come to the rescue.
In Asia and Latin America cases, the common aspect of the crises is a fact that many countries experienced financial instability before the currency crisis. When the Peso crisis happened, the Mexican banking sector had been seriously vulnerable due to liberalization and privatization of financial sector. Financial liberalization in 1988 generated a rapid increase in bank lending pulled by the consumption boom that caused the financial instability by accumulating non-performing loans. In Thailand, asset bubble had already collapsed in 1996 and it brought about a sharp decline in immobile and stock price.
2. A highly leveraged private sector
The heavy dependence of short-term capital inflows is important. Mexico had received
1. Financial instability
In EU crisis and US financial crisis cases the banking sector was hit hardest and accelerated the crisis through a credit crunch and credit crisis. Whereas in the US this process was driven by a real estate boom and the issuance of complex securities (as bad assets), in the EU the treasury bonds of the periphery states were playing the role of the bad securities that became a problem for the banking system. In these cases a relatively unregulated banking system became the amplifier of the boom as well as the bust. Though the EU crisis is still evolving it appears to take a similar path as in the US. Whereas in the US the monetary and fiscal policy came to the rescue, this will be much harder to achieve in a less unified EU with limited power of the Central Bank, the heterogeneous fiscal policies of the countries and the fragmentation of the banking regulations. But predictions are difficult in particular if it concerns the future. In the case of the EU, a still growing world economy may come to the rescue.
In Asia and Latin America cases, the common aspect of the crises is a fact that many countries experienced financial instability before the currency crisis. When the Peso crisis happened, the Mexican banking sector had been seriously vulnerable due to liberalization and privatization of financial sector. Financial liberalization in 1988 generated a rapid increase in bank lending pulled by the consumption boom that caused the financial instability by accumulating non-performing loans. In Thailand, asset bubble had already collapsed in 1996 and it brought about a sharp decline in immobile and stock price.
2. A highly leveraged private sector
The heavy dependence of short-term capital inflows is important. Mexico had received