1 / 26

1997 - 1998

1997 - 1998. Economic success. Annual GDP growth in the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) averaged close to 8% over the decade before the crisis Almost half of total capital inflows to developing countries nearly $100 billion in 1996

shanae
Download Presentation

1997 - 1998

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 1997 - 1998

  2. Economic success • Annual GDP growth in the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) averaged close to 8% over the decade before the crisis • Almost half of total capital inflows to developing countries • nearly $100 billion in 1996 • inflation & unemployment rates both low

  3. Ramifications • Negative consequences • Environmental degradation • growing inequality between rich and poor • rampant corruption • social malaise • Significant and real benefits • great majority of the people’s living standard • have not been erased by the crisis

  4. Weaknesses in financial system • inadequate financial sector supervision • poor assessment and management of financial risk • growth of bad loans • state-directed lending • relatively fixed exchange rates • violent asset price cycles • property boom bubbles

  5. Weaknesses in financial system • Large amounts of short-term international capital, denominated in foreign currency

  6. Corruption • Transparency International’s 1999 survey of corruption • Singapore 7th • Malaysia 31st • South Korea 50th • Philippines 54th crisis countries • Thailand 68th • Indonesia 96th

  7. Diary of the crisis: I

  8. Diary of the crisis: II

  9. The cause of capital outflows • Bank failure in Thailand • Corporate failure in Korea • Political uncertainty due to the potential for a change in government in Korea, Thailand, the Philippines, and Indonesia • net outflow of $105b from Thailand, Malaysia, South Korea, and the Philippines between 1996 and 1997

  10. The cause of capital outflows • Contagion effects hit Malaysia, the Philippines and Indonesia • The IMF’s intervention actually helped to incite panic

  11. Causes of financial crisis • macroeconomic imbalances • structural deficiencies in financial sector • loss of market confidence • rising political risk

  12. IMF's immediate response • Help Indonesia, Korea, and Thailand arrange programs of economic stabilization and reform • Approve IMF financial support for reform programs in Indonesia, Korea, and Thailand

  13. IMF’s immediate response • Consult with other members that needed to take policy steps toward off the contagion effect

  14. Asian programs • comprehensive reform of financial systems • closure of unviable financial institutions • associated write down of shareholders' capital • recapitalization of undercapitalized institutions • close supervision of weak institutions • increased potential for foreign participation in domestic financial systems

  15. Reforms in governance • break the close links between business and governments • ensure that the integration of the national economy with international financial markets is properly segmented

  16. Real GDP Growth (%)

  17. Inflation rate (%)

  18. GDP growth rate (%)

  19. Impact on Japan

  20. Impact on World

  21. Three schools of thought

  22. Three schools of thought • Revisionist: “developmental state” • Market must be mediated, regulated and guided by the state • Culturalist • “Asian values” • Culture context of East Asia explains the miracle

  23. Recovery from the Crisis

  24. Lessons from the Crisis • Better information • Regulation and restraint • Controlling capital flows

  25. International Organizations • Authority vis-à-vis sovereign governments • Access to information • Risk of ``creating” a crisis • Globalization and interdependence

More Related