In search for a new foundation for welfare professor tang kwong leung, dept of social work the chinese university of hong kong abstract after the 1997 asian financial crisis, some east asian governments began to examine their social policy approaches. Eddy lee the debate on the causes of the asian crisis. The year 2010 is shaping up as a year of considerable coverage, with the estimated number of articles mentioning the deficit nearly as large as in 2006 and 2007, the highwater mark years see figure 3. Introduction the financial crisis in east asia started off in july 1997 when the pressure on thai baht became so severe that the government was forced to cease defending the exchange rate peg and allow it to float freely in order to avoid default. Even two years after it ended, anxiety still loomed over global financial markets. Major financial crisis from great depression to great recession.
The crisis prompted the regional economies, which were becoming. Indian rupee depreciated by 15% against the us dollar, compared to declines of between 25 and 35% in the thai, malaysian, and. Unlocking the potential for east and northeast asian. What caused the asian currency and financial crisis. East asian crisis world bank documents world bank group. In the modern history of economic upheavals, the east asian financial crisis that began in 1997 with the fall of the thai baht surprised economists in two ways. Steven radelet jeffrey sachs march 30, 1998 the onset of the east asian financial crisis. Factors that caused the 1997 east asian financial crisis.
The asian financial crisis of 199799 stephan haggard introduction the asian economic crisis of 199799 was a singular event in the regions postwar economic history. Our goal is to pinpoint the most significant indicators that have caused the, up until 1997, rapidly growing economies of east asia to fall into severe recession. Impact on asia and policy challenges ahead heng swee keat. Interlinkages among south east asian stock markets a comparison between pre and post 1997 crisis periods interlinkages among new york ny, tokyo tk and five south east asian sea stock market returns before and after the asian currency crisis are examined using tests on correlations and var models. The mexican crisis began in december 1994 when the peso was devalued sharply. The asian financial crisis of 1997 affected many asian countries, including south korea, thailand, malaysia, indonesia, singapore, and the philippines. January 28, 2009 financial crises in historical perspective economics 210b barry eichengreen spring 2009 department of economics monday 12. In the past decades the economies of east asia broadly defined to include also southeast asia have generally performed well compared with the rest of the world. Following the asian financial crisis of 1997 1998, east asian economies have embarked on various initiatives for economic integration and cooperation in the areas of trade and investment. Responding to the east asian crisis world bank documents. Couses, policy responses, and outcomes wp998 created date.
Financial crises, dollarization and lending of last resort in. The impact of these policies is often referred to as the east asian miracle. Japans perspective takatoshi ito discussion paper no. Annual economic growth in these economies during this period exceeded that of most other economies in the world. Again, this was unlike 1997 98, when they were forced to sharply raise interest rates to support their currencies and reduce capital flight. Kim and haque 2002 observe that the east asian countries. The social impact of financial crisis in east asia evidence from the philippines, indonesia and thailand english abstract. South east asian countries like thailand, malaysia etc for several years before 1997 were receiving large amount of short term portfolio investment money. The asian currency crisis of 1997, the latest world financial crisis, the unprecedented economic growth of east asian countries, and the growing popularity of monetary and economic integration, have prompted the possibility of monetary and economic integration of southeast asian countries centered around china as the main engine of economic growth. It started to climb in early 1996, and continued to increase, staying high at more than 70 percent until november 1997 when the korean won depreciated by 17 percent.
The asian financial crisis, also called the asian contagion, was a series of currency devaluations and other events that spread through many asian markets beginning in. In 1997, there occurred certain shifts in expectations from the market. Lee kuan yew, 1992 the present economic crisis proves that in choosing democracy over authoritarianism, we. Table 3 contains information on the sharp decline in growth and, in many cases, absolute declines in overall economic activity throughout east asia between 1997 and 1998. To what extent has globalization been a factor in the economic crisis. It started in thailand with a sudden fall in the stock market and then spread to indonesia, south korea, malaysia and to other countries in the region. Walsh sydney morning herald, 22 october 1997 documents that in 1997 the ratio of stock market credit to gdp in malaysia was higher than that in the united. The title of this article should be asian financial crisis of 1997 or 1997 asian financial crisis. Again, this was unlike 199798, when they were forced to sharply raise interest rates to support their currencies. Hong kong, singapore, south korea, taiwan and tiger cubs i. Looking back at asian financial crisis 20 years after duration. The period of relative stability is defined s from december 29, 1994 through toa march 31, 1997.
The study focuses on the social impact, as suffered in three asian countries philippines, indonesia and thailand following the 1997 financial crisis, seemingly a much less homogeneous, and universal impact than initially forecasted. The east asian financial crisis stephany griffithjones. The crisis hlt the most rapidly growing economies in the world and prompted the largest financial bailouts in history. Ten years after the asian crisis friedrich ebert foundation. During the asian crisis of 1997, several factors contributed to the growing sense of regionalism. Paul krugmans 1994 provocative critique of east asian growth suggested a slowdown in growth, not a collapse, a point that krugman himself made clear in the fall of 1997, at the start of the financial crisis. Emerging east asian banking systems ten years after the. The indonesian story by ginandjar kartasasmita introduction indonesia is one of the countries that was most seriously affected by the asian financial crisis and that is the slowest to recover.
Many observers considered the asian economic crisis a primary reason for the 199798 instability in the financial markets of the u. The financial crisis that struck many asian countries in late 1997 did so with an. To identify a shiftcontagion in these markets during the east asian financial crisis, two periods are defined as stable and crisis periods. The debate on the causes of the asian crisis ipg 299, pdf.
The regional contagion and confidence led to the east asian financial. Mishkin graduate school of business, columbia university, uris hall 619, 3022 broadway, new york, ny10027, usa national bureau of economic research, cambridge, ma 028, usa abstract this paper provides an asymmetric information analysis of the recent east asian crisis. Lessons for oic countries enver hakan konac the crisis, which erupted in asia s financial markets in 1997, had severe effects on the involved countries. Two years ago, very few, if any at all, foresaw a regional crisis. Since the period of high growth begana period dating to the 1950s for japan and the 1960s for korea, taiwan, hong kong and singaporeeast asia had not. The period of turmoil is defined as from june 1, 1997. Financialsector weaknesses each of the asean4 economies experienced a credit boom in the 1990s, that is, the growth of bank and nonbank credit to the private. In 1997, there was a dramatic reversal of capital flows. All these considerations came together with the 1997 asian financial crisis, now commonly recognized as the turning point in what many describe as emerging or nascent east asian regionalism.
Koreas economic adjustments under the imfsupported program. As soon as the crisis hit in mid1997, the international monetary fund imf, which led the official international response, assigned primary respon sibility to the shortcomings of east asian capitalism, in particular, the east asian financial markets. The crisis which started with the devaluation of thailands currency in the summer of 1997 quickly spread to other countries of south east and east asia. The drive towards experimentation rose out of the east asian financial crisis of 1997 to. In a matter of just a few months, the asian economies went from being the darlings of the investment community to being virtual pariahs. The problem started in thailand, where an overheated property market, weak banking system. What was the main reason for the asian financial crisis of. The financial crisis in many countries in asia in 19971998 was an unexpected event. Japans perspective takatoshi ito1 the university of tokyo presented in the aea session on east as ian economic cooperation and integration january 2004 1. This is often called hot money because it can leave the country very quickly unlike i. Toward economic sustainability in southeast asia suthiphand chirathivat 1. These lessons span crisis prevention, management and resolution, and building a new international financial architecture with a regional focus. In the case of korea, the crisis probability remained below 20 percent for most months during 19901995.
However the 199798 asian crisis, which erupted in july 1997 in thailand, expanded to other asian nations, and then to russia and latin america, and eventually spread to the rest of the world. Introduction one of the challenges of a volume such as this one is balancing the broad and the narrow. Philippine resiliency to the asian financial crises. The latest versions of adobe reader do not support viewing pdf files within firefox on mac os and if. Pdf examines the causes of the asian financial crisis in 1997 and the responses to it in terms of economic policies. What is a detailed explanation of the south east asian. If, in cases of the affected asian countries, there were strong warning signals of a heightened probability of a financial crisis prior to the 1997 crisis from such models, then there are good reasons. To our great frustration and dismay, the crisis came rather suddenly, and deepened and widened beyond anybodys expectations. Effects of the asian financial crisis on 1997 1006 words. Major financial crisis from great depression to great recession this paper is dedicated to the doyens of indian banking, dr.
The east asian currency crisis of 1997 98 and the russian currency crisis of august 1998 made investors in developed countries much more cautious about investing in developing countries generally. Factors that caused the 1997 east asia financial crisis discuss the principal factors responsible for the east asian currencyfinancial crisis of 1997. A critical analysis of the 1997 asian financial crisis. Presented in the aea session on east as ian economic cooperation and integration january 2004 1.
The asian financial crisis that was triggered in july 1997 was a shocker. It is the sharpest financial crisis to hit the developing world since the 1982 debt crisis. This distance between the united states and asia grew during the years of the george w. When it came, the asian financial crisis commenced and. A great deal of effort has been devoted to trying to understand its causes. Indonesian financial crisis in the summer of 1997, the east asian economic miracle, which had produced unprecedented growth throughout the pacific rim, began to unravel. The role of the international monetary funds imf in the east asian debt crisis of 1997. On october8th 1997, indonesiaasksthe imf and the world bank for financial assistance. Asian financial crisis, major global financial crisis that destabilized the asian economy and then the world economy at the end of the 1990s the 199798 asian financial crisis began in thailand and then quickly spread to neighbouring economies. There are commonalities to the pre and postcrisis experiences of east asian. Beginning in 1997, with seven economies that have expanded at least 7 per cent a year for a quarter century japan, korea, taiwan, china, malaysia, indonesia and thailand east asia entered a period of reckoning of its own, as the asian financial crisis took hold.
Forthcoming in, in east asia ten years after the crisis. On october17 th 1997, despitebeinga creditorcountry, taiwan isforcedto let the new taiwan dollar float. Southeast asia has come a long way since the financial crisis of 1997 1998. After ten years, the 1997 asian financial crisis has not only affected how business is conducted in southeast asia, it has also reshaped the terrains of politics. The social impact of financial crisis in east asia.
On october22th 1997, south koreanationalisedkiamotors, whichledsandardand poorsto downgradethe south koreanforeigndebt. The asian financial crisis involves four basic problems or issues. Paul krugmans 1994 provocative critique of east asian growth suggested a slowdown in growth, not a collapse, a point that krugman himself made clear in the fall of 1997. Imf world economic outlook weo, interim assessment, crisis. These great men handled the macroeconomic policies of the nation as governors of the reserve bank of india with. In summary, the philippines was more resilient to the asian crisis compared to its asian neighbors, since most of the loans went to the productive sectors of the economy, its financial system was more robust, and available credit to businesses did not contract to the same extent as its neighbors. What i learned at the world economic crisis by joseph. What is most notable is the way in which it is producing institutional experimentation in financial architectures in the developing world. Yungchul park 1996 is a notable exception, but voices such as his were rare and generally went unheeded. There was a touch of the absurd in the unfolding drama, as international money managers harshly castigated the very same asian governments. This triggereda renewalof attacksagainstcurrenciesmore in the north. Tahirou, yaro sadek 20 the role of the international monetary funds imf in the east asian debt crisis of 1997, journal of undergraduate research at minnesota state university, mankato.
What i learned at the world economic crisis by joseph stiglitz new republic april 17, 2000 next weeks meeting of the international monetary fund will bring to washington, d. Anticipating the end of the crisis, the east asian governments are bustling to prepare their. It began as a currency crisis when bangkok unpegged the thai baht from the u. The asian financial crisis was a period of financial crisis that gripped much of east asia and southeast asia beginning in july 1997 and raised fears of a worldwide economic meltdown due to financial contagion the crisis started in thailand known in thailand as the tom yum goong crisis. The 1997 asian financial crisis signalled the end of the asian tigers economic miracle. The thai baht was the first currency to experience problems. Growth and recovery in east asia national bureau of. Trade disputes between china and the united states. Unlocking the potential for east and northeast asian regional economic cooperation and integration the asian financial crisis of 1997 98 provided the first opportunity for deepening regional cooperation and integration in the region by dramatically demonstrating the impact of financial and economic crises and highlighting the need. After posting some of the most impressive growth rates in the world at the time, the socalled tiger economies saw their stock markets and currencies lose about 70% of their value.
Origins of the crisis financial crises are seldom generated by one or two isolated factors. Edvallorani 12142009 1997asianfinancialcrisis tableofcontents background. The east asian financial crisis has so far been true to form. A reflection on its causes, consequences and policy implications ids discussion paper 367 stephany griffithjones with jacques cailloux and stephan pfaffenzeller summary this paper looks into the causes and the economic and social implications of the east asian currency crisis. Introduction the asian financial crisis was a period of financial crisis that gripped much of east asia beginning in july 1997 and raised fears of a worldwide economic meltdown due to financial contagion. Brazil, argentinas largest trading partner, withstood a currency crisis from august to october 1998, on the heels of the russian crisis, but when.
This mechanism was rst recognized as playing an important role in the east asian crisis of 1997, and more recently has been a cause for concern in many emerging economies, such as, e. Causes, recovery, and the path going forward research pdf available march 2016 with 5,143 reads how we measure reads. Monetary policy responses were swift, with many asian central banks cutting interest rates in rapid succession. Pdf the asian financial crisis of 19971998 revisited. Foreword over the past decade, attention was focused on asia as the fastest growing region in the world. East asia monetary integration and long term economic growth. The economic and financial crisis that erupted in southeast asia in july 1997 continued to deepen and broaden as of december, and spillover effects from investors deteriorating confidence in emerging market economies were being felt throughout the global financial. Introduction movements toward regional economic and monetary integration has been accelerating in east asia. The east asian financial crisis is remarkable in several ways. A financial crisis started in thailand in july 1997 and spread across east asia, wreaking havoc on economies in the region and leading to spillover effects in latin america and eastern europe in 1998. The asian financial crisis of 1997 99 stephan haggard introduction the asian economic crisis of 1997 99 was a singular event in the regions postwar economic history.
Fdi inflows increased twelvefold and east asian exports increased fivefold between 1985 and the east asian crisis in 1997. N the second half of 1997 several east asian crisis countries experienced a massive reversal of the large foreign private capital inflows they had enjoyed through much of the 1990s. East asian regionalism began to emerge during the financial crisis of 19971998, when many in the region felt that the united states did little or nothing to assist them. Steven radelet jeffrey sachs march 30, 1998 the onset of. Then, within the framework of the defined variables, the analysis section compares the east asian crisisaffected countries with china. Causes of the 1997 asian financial crisis asian development bank. What does the asian crisis mean for the us economy. Newly awakened east asian identity after the 1997 asian financial crisis has set the tone for an east asian economic community movement. Vxfksuhvvxuhvdqgeholhivuhsuhvhqwhgwkhxqghuslqqlqjvridvxvwdlqhg surfhvvrifdslwdodffxpxodwlrq9 uhvxowlqjlqwrshuvlvwhqwdqgvldeohfxuuhqw dffrxqwgh. It presents a revision to the commonly held global saving glut view that east. Ten years after, the regions accomplishments in grappling with and overcoming the crisis and in returning to sustained growth are varied and. Since the period of high growth begana period dating to the 1950s for japan and the 1960s for korea, taiwan, hong kong and singapore east asia had not. I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of savinga global saving glutwhich helps to.
The collapse of the thai baht in july 1997 was followed by an unprecedented financial crisis in east asia, from which these economies are still struggling to recover. Teehankee what a country needs to develop is discipline rather than democracy. Progress in these areas would have helped prevent, or at least minimize, both the east asian crisis and more recent crises. Thailand, malaysia, indonesia, the philippines were held as role models to developing nations on how to achieve economic growth. The east asian countries at the center of the recent crisis were for years. The enormity of the shock is captured by the fact that in the worstaffected countries real gdp growth has turned. Political scientists and economists, among others, have offered. Effect on india india was two large countries where gdp growth was relatively unaffected by the east asian crisis indias balance of payments bop was also spared the effects of the east asian turmoil. Prospects and challenges east asia has emerged as the main trigger of asian century unfolding in the 21st century. Third and finally, in mid 1997 the asian miracle came to a halt, at least temporarily, as the asian financial crisis began. But the crisis of 2008 is in many ways distinct from its predecessors. This year, malaysias economy is expected to decline by 35%. East asian financial crisis 1997 99 and the years just prior to the great recession 200507.
This wasnt the first and wont be the last asian financial crisis. Then, in 1997, many of these fastgrowing economies, seemingly without warning, turned around and faced economic collapse as a result of financial and currency crises that spread all over asia as well as other emerging markets in the world. The ews model is constructed using monthly data from 1970 to 1995 for indonesia, republic of korea korea, malaysia, philippines, singapore, and thailand. The december 1997 world economic outlook weo, interim assessment table of contents with links to the full text in pdf format. He asian crisis began in the summer of 1997 with the dra. On and 14 july 1998, a conference on the east asian crisis was held at the institute of development. It was mainly because most of the asian countries had been enjoying economic growth prior to the crisis. The role of the international monetary funds imf in the.