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. [...]
[...] These measures and reforms should include the formulation of prudent guidelines for financial institutions to follow and an increment of transparency in the area corporate governance5o. Moreover, it can be said that the economies had a very loose ‘hold' on the rate of capital imports. This was one of the key failures that cause the crisis to spiral out of control. Having a stringent control of capital imports will ensure that the domestic economy is insulated from any unforeseen fluctuations in the international financial markets5p. [...]
[...] The financial crisis itself began in 1997 when it spread from Thailand to other economies in the region. It was characterised by the bankruptcy of major banks and companies within these economies3a. The scale of the financial breakdown was staggering to international observers and the world economic organizations. Once the crisis hit, the International Monetary Fund (IMF) had to intervene in order to curtail the situation3b. They did so by providing the tiger economies with relief funds. However, these relief funds were given to the tiger economy governments on the conditional basis that they pursue stringent measure for economic restructuring3c. [...]
[...] In general, the greater the proportion of short-run debt, the more likely it is for a liquidity crisis to occur4g. The reason why the tiger economies had to accumulate short-term debt was because they needed to finance booming domestic investments in fixed capital under the floating' capital account4h. The scenario was particular predominant in the Thai economy with setting up of an offshore market which was known as the Bangkok International Banking Facility (BIBF)4i. As a result of the massive of large expansion of interest rates between the Thai economy and higher income economies, the domestic banks in Thailand were in a haste to borrow from foreign banks4j. [...]
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