asian crises 1997
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Asian Crisis in 1997By – Hitendrasinh ZalaKetan Changani Ruchi GattaniShoaib QureshiVishal Bhatnagar
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Overview of CrisisThe Asian financial crisis is considered to have started on July
2, 1997 with the devaluation of the Thai baht and ask IMF for assistance.
Malaysia blames the speculators on July 14Philippines seek assistance form IMFIndonesia floats on August 14, go to the IMF on October 8Global stock market decline on October 27S. Korea devalue Nov. 28 and ask for IMF assistanceSpread over other Asia countries
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CausesPoor Regulation of the Economy
Over-Inflated Asset Prices
Macroeconomic Policy: Fixed Exchange Rates
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HistoryThe reason for economic growth in Southeast Asian countries
was the high interest rates on investments they offered
USA came out of recession & started offering high investment rates which made them the new destination for investments
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HistoryChina reformed its export policies
The Southeast Asian countries growth was majorly due to investments & not the actual growth
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Impact of the CrisisNegative ‘wealth effect’ on investors across the world Falls in
Equity Markets
International Trade: break on the growth of exports from the major economies .5% of GDP in Japan, 1½% of GDP in Europe and 3% in the US
Import side prices slashed
Foreign Direct Investment: cut back severely
Economic Growth: constant downward revision of economic growth forecasts
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Bubble Theory• Bubble fueled by "hot money”
• More and more was required as the size of the bubble grew
• Short-term capital flow was expensive and often highly conditioned for quick profit
• Development money went in a largely uncontrolled manner to people closest to the political power
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Preventing Future CrisisUniversal tax on currency transactions to deter speculation
by the markets
Improve global regulation, which would involve the IMF, the World Bank and other regulators
Creating a process of active and transparent surveillance of borrowing nations
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Preventing Future CrisisCreating a Code of Best Practice on social policy issues, so
that financial crises, if they do occur, do not result in disproportionate increases in poverty within developing countries
Enhancing regional surveillance: ASEAN
The provision of fuller economic and financial information to the public by governments, financial institutions, and corporations
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ConclusionGlobalization is a two-edged sword
Poor corporate governance & inadequate financial system supervision build vulnerabilities
To avoid any further mishaps we need,Increased international cooperation in monitoringSharing of informationEarly Warning System
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Queries
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THANK YOU