Analysis and Comparsion of the Ways in Which East Asia States Recovered from the Financial Crisis of 1997-98
Analyse and compare the ways in which East Asia states have recovered from the financial crisis of 1997-98
The East Asian Financial crisis occurred during 1997 - 98 and adversely affected five East Asian nations (Thailand, Malaysia, Indonesia, the Philippines and South Korea). According to (Sundaram 2006), the crisis was triggered by the collapse of the Thai baht in 1997, leading to a currency crisis, which brought about a financial quagmire leading to an economic havoc. The crisis had a devastating effect that impacted on the social, political and economic aspects of each of the five economies (Wesley, 1999). The meltdown which came as a surprise much to everyone’s chagrin, was due to the fact that East Asian countries had always been attributed with a record of economic success, even at one point being dubbed the 'miracle nations '. Notably, the benefits of economic growth were widely shared throughout the population leading to financial excesses. However, problems began to emerge in both macroeconomic (capital inflows, real exchange rate appreciation) and microeconomic (credit expansion, financial regulation and supervision) in the 1990s, that partially contributed to the onset of the crisis (MacIntyre, 2008). Further, Lucarelli (2002) clarifies that the crisis was attributed to three factors; firstly, most Asian currencies were pegged to the exchange rate of the U.S. dollar, which meant that if the US dollar appreciated then the export competitiveness of the East Asian exporting nations were affected. Secondly, the weak export demand in the European Union (EU) and Japan had been struggling to recover from sluggish growth thus leading to a slow balance of payments. Thirdly, the export slump, which preceded the financial crisis, caused chronic problems of excess productive capacity. In addition, it is also argued that there was too much short-term capital flowing into weak and under-supervised financial systems that finally led to a shortfall of liquidity
The East Asian Financial crisis occurred during 1997 - 98 and adversely affected five East Asian nations (Thailand, Malaysia, Indonesia, the Philippines and South Korea). According to (Sundaram 2006), the crisis was triggered by the collapse of the Thai baht in 1997, leading to a currency crisis, which brought about a financial quagmire leading to an economic havoc. The crisis had a devastating effect that impacted on the social, political and economic aspects of each of the five economies (Wesley, 1999). The meltdown which came as a surprise much to everyone’s chagrin, was due to the fact that East Asian countries had always been attributed with a record of economic success, even at one point being dubbed the 'miracle nations '. Notably, the benefits of economic growth were widely shared throughout the population leading to financial excesses. However, problems began to emerge in both macroeconomic (capital inflows, real exchange rate appreciation) and microeconomic (credit expansion, financial regulation and supervision) in the 1990s, that partially contributed to the onset of the crisis (MacIntyre, 2008). Further, Lucarelli (2002) clarifies that the crisis was attributed to three factors; firstly, most Asian currencies were pegged to the exchange rate of the U.S. dollar, which meant that if the US dollar appreciated then the export competitiveness of the East Asian exporting nations were affected. Secondly, the weak export demand in the European Union (EU) and Japan had been struggling to recover from sluggish growth thus leading to a slow balance of payments. Thirdly, the export slump, which preceded the financial crisis, caused chronic problems of excess productive capacity. In addition, it is also argued that there was too much short-term capital flowing into weak and under-supervised financial systems that finally led to a shortfall of liquidity
References: Henderson, J (2011), East Asian Transformation: On the Political Economy of Dynamism, Governance and Crisis, Routledge. Krugman, P (1998), 'What Happened to Asia ', [Online] Available from: http://web.mit.edu/krugman/www/DISINTER.html Lucarelli, BB (2002), 'The East Asian Financial Meltdown ', Journal of Contemporary Asia, 32, 4, pp. 500 MacIntyre, T, Pempel, J & Ravenhill J (2008), 'East Asia in the Wake of the Financial Crisis ', Crisis as Catalyst: Asia’s Dynamic Political Economy Sohn, I (2005), 'Asian Financial Cooperation: The Problem of Legitimacy in Global Financial Governance ', Global Governance, 11, 4, pp. 487-504 Sundaram, J (2006), 'Pathways through Financial Crisis: Malaysia ', Global Governance, 12, 4, pp