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The Asian financial crisis of 1997: Its causes and its consequences (2007)

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  1. Logistics at H&M: An essential service
    1. Logistics in the textile world
    2. Logistics and distribution H&M
    3. Purchase and production
  2. The characteristics of the logistics of H&M: the sales through supply chain
    1. The sell-through
    2. Definition of supply chain
    3. Logistics in the "supply chain"

Until they suddenly fell from grace in 1997, countries hit by the financial crisis in Asia - Korea, Indonesia, Malaysia and Thailand - were admired for their economic achievements and attracted foreign investors. Indeed, on 2 July 1997, the Asian crisis broke out. It would have the effect of a 'tsunami' and would revolutionize the entire financial landscape in Asia. The crisis began on July 2, 1997, with the authorities' decision to float the Thai baht which would result in the fall of the Indonesian rupiah, the Malaysian ringgit and Philippine peso.

This 'snowball' effect did not stop there since it spread to Korea, Taiwan, Singapore and Hong Kong. This is called the 'domino effect' because it is characterized by a series of financial movements that create a general depreciation of the entire network. Moreover, this crisis was characterized by the collapse of the currencies concerned, a fall in national product, a slowdown in external trade and a surge in inflation.

Thus, at the end of the crisis, during the first half of 1998, the situation was as follows: a depreciation against the US dollar: 75% (Indonesia), 35% (Thailand, Malaysia, Philippines); the fall in stock prices: 50% (Korea), 45% (Malaysia, Indonesia), 30% (Thailand, Philippines, Hong Kong, Singapore); the decline of economic activity: 20% (Indonesia) 15-20% (Thailand), 10-15% (Malaysia, Korea, Hong Kong) 0-5% (Philippines).

This is not the first financial crisis of contemporary history, but a comparison with previous crises shows that exchange rate depreciation was equivalent. However, the decline in activity and adjusting current payments were higher. This article has, therefore, chosen to study this event because it is a contemporary crisis whose magnitude had shaken the international financial landscape. Many lessons have been learnt after that event. We will try to understand the causes and consequences of the Asian financial crisis.

To better understand this crisis, we will first analyze the Asian economy from several angles:
Regarding industry: rise of the "Tigers" in the automotive and electronics. Currencies: devaluation of the yuan by about 40% in 1994 and weakening of the yen against the U.S. dollar and other Asian currencies.

Most currencies in the region tied to the dollar in the mechanisms of so-called "peg" (almost akin to a fixed exchange rate system, however, taking into account inflation differentials) have thus been caught in the pincer yen / yuan especially since the time of high inflation was well over. Adjoin to this the Mexican devaluation of early 1995 which disadvantages Asian exports to the U.S. market.

Trade: unable to play in money was all the more regrettable that the commercial level, the first consequences of the Uruguay Round had already been felt in terms of market opening, deregulation and market liberalization. In most countries in the region, the influx of capital has led to more real estate than to that of the industry.

In fact, the guarantee of the stability of the exchange coupled with high interest rates attracted mass of hot money that did not always invested productively. The bubbles are so inflated sandstone megalomania businessmen and local politicians. It could have been bearable if these countries had at least obeyed the so-called "prudential ratios" for political and economic risks.

Faced with these problems, Asia was poorly prepared to tackle the financial crisis. These economic, political and financial will help to strengthen it. In this document, we will see the exact causes of this financial crisis.

Tags: Asia; financial crisis; causes of the financial crisis; consequences of the financial crisis

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