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Economic crisis in South-east Asia

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  1. The factor which leads to the unprecedented expansion.
  2. The unprecedented and unhealthy levels of competition in South Korea.
  3. Countermeasures which countries took in order to rectify the problem.
  4. Lesson that were learned from the South-East Asian economic crisis.
  5. Conclusion.

In order to fully appreciate the nature of the economic crisis in south-east Asia, it would be necessary to have at least some insight into the nature of these economies prior to the financial problems they experienced1. Before the onset of the Asian crisis, the south-east Asian countries concerned or the ?tiger economies' as they are also known, experienced exponential growth right from the 1960 to the early 1990s1a. This supernormal growth was termed by experts as the ?Asian Miracle'. The first thing worth noting is the fact that each of these tiger economies was extremely diverse in terms of natural resources, demography, culture, social and economic policy1b.

[...] Journal of Financial Intermediation, pp World Bank (1993), The East Asian Miracle: Economic growth and public policy, Oxford university press, p8 1a World Bank (ibid), p 8 1b World Bank (ibid), p 8 1c Eatwell,J, Murray, M and Newman, P(1989), Economic development, Palgrave, p Chang, S (2005), Business Groups in East Asia: financial crisis, restructuring and new growth, Oxford university press, p 52 2a Chang, S (ibid), p52 2b Chang, S (ibid), p52 2c Chang, S (ibid), p Todaro, M and Smith, S (2006)(9th ed.), Economic Development, Pearson, p 65 3a Hayami, Y (2001)(2nd ed.), Development Economics: From the poverty to the wealth of nations, Oxford university press, pp273-6 3b Hayami, Y (ibid), pp273-6 3c Hayami, Y (ibid), pp273- Hayami, Y (ibid), pp273-6 4a Hayami, Y (ibid), pp273-6 4b Hayami, Y (ibid), pp273-6 4c Hayami, Y (ibid), pp273-6 4d Hayami, Y (ibid), pp273-6 4e Hayami, Y (ibid), pp273-6 4f Hayami, Y (ibid), pp273-6 4g Hayami, Y (ibid), pp273-6 4h Hayami, Y (ibid), pp273-6 4i Hayami, Y (ibid), pp273-6 4j Hayami, Y (ibid), pp273-6 4k Hayami, Y (ibid), pp273-6 4l Hayami, Y (ibid), pp273- Meier, G and Rauch, J (2000)(7TH Ed.), Leading Issues in Economic Development, Oxford university press, p 47 5a Meier, G and Rauch, J (2000)(7TH Ed.), Leading Issues in Economic Development, Oxford university press, p 47 5b Meier, G (ibid), p47 5c Meier, G (ibid), p47 5d Hayami, Y (ibid), pp273-6 5e Hayami, Y (ibid), pp273-6 5f Hayami, Y (ibid), pp273-6 5g Hayami, Y (ibid), pp273-6 5h Hayami, Y (ibid), pp273-6 5i Meier, G (ibid), p47 5j Borensztein, E. [...]

[...] In terms of the lesson that were learned from the South-East Asian economic crisis, the IMF and the World Bank realised that it was time for the affected countries to change the method of their economic governance in the direction of the Washington consensus5n. In future the economies of South- East Asia should opt to pursue economic reforms that are aimed at making domestic financial markets more protected against unforeseen instabilities and market risks in terms of international financial investment. [...]

[...] Without a doubt, there was no way this situation could be sustained by any of the South-East Asian economies and as result the economic expansion bubble was inevitably going to burst. This is exactly what happened in 1997 when the Thai government decided to devalue the baht5d. Subsequently, an atmosphere of panic set in and many foreign investors withdrew their funds from the region. In terms of the countermeasures which countries took in order to rectify the problem, the IMF had a major role to play in this regard. [...]

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