1997 Asian financial crisis

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The countries most affected by the 1997 Asian financial crisis.

The Asian financial crisis was a period of financial crisis. It gripped much of Asia beginning in July 1997.

Causes[change | change source]

Currency pegs and fixed exchange rates: Many Asian countries, including Thailand, South Korea, and Indonesia, had fixed exchange rate regimes or money pegs to the U.S. dollar. This made their currencies vulnerable to speculative attack.[1]

 Rapid capital inflows and excessive borrowing: Asian economies experienced a surge in capital inflows and relied heavily on foreign borrowing, leading to over-investment and unsustainable levels of debt [2]

 Weak financial systems and corporate governance: short financial regulations, weak banking sectors, and poor corporate governance practices exacerbated the vulnerabilities in the affected economies

Consequences[change | change source]

Money reduction: Many Asian currencies experienced significant devaluations, leading to a sharp decline in the value of assets and increased debt burdens for companies with foreign currency liabilities

 Financial sector failures: Banks and financial institutions faced insolvency and encountered difficulties in meeting their duty, contributing to a severe banking crisis in the region [3]

 Economic contraction and social impact: The crisis resulted in severe economic contractions, rising unemployment, and social hardships, including increased poverty rates and social unrest in some countries [4]

IMF role[change | change source]

International Monetary Fund (IMF) assistance and conditionality: The IMF provided financial assistance to the affected countries, often in exchange for implementing structural reforms, fiscal austerity measures, and financial sector reforms [5]

References[change | change source]

  1. Christiano, Lawrence; Gust, Christopher (April 2000). "The Expectations Trap Hypothesis". Working paper (Federal Reserve Bank of Cleveland). doi:10.26509/frbc-wp-200004. ISSN 2573-7953.
  2. "What happened to Asia?". web.mit.edu. Retrieved 2023-05-30.
  3. "Finance and Development". Finance and Development | F&D. Retrieved 2023-05-30.
  4. "Asian Financial Crisis: Causes, Response, Lessons Learned". Investopedia. Retrieved 2023-05-30.
  5. "The Asian Crisis: A View from the IMF--Address by Stanley Fischer". IMF. Retrieved 2023-05-30.

Related pages[change | change source]

Papers[change | change source]

Other websites[change | change source]