Ebook Financial Crisis in East Asia: Bank Runs, Asset Bubbles and Antidotes
What is so special about the East Asian crisis? Radelet and Sachs (1998a, p.1) provide a graphic answer as follows: “The East Asian financial crisis is remarkable in several ways.
The crisis has hit the most rapidly growing economies in the world. It has prompted the largest financial bailouts in history. It is the sharpest financial crisis to hit the developing world since the 1982 debt crisis. It is the least anticipated financial crisis in years”.
After a brief account of the facts in section 2, we outline various types of financial crisis (section 3). Then in section 4, we ask which theory best fits the facts. Was the East Asian crisis essentially creditor panic where a mad scramble for liquidity brought inherently sound financial and economic system to its knees as Radelet and Sachs (1998b) suggest? ;or was the miracle indeed flawed by fundamental problems in asset prices and resource allocation? We conclude that both factors played a role: there was certainly a creditor panic, but it was in large part due to economic excesses in the domestic private sector and inadequate regulatory responses by the government, particularly in respect of banking.
Section 5 discusses how contagion can occur in environments where investors are poorly informed and each looks to the others for guidance. Various approaches to crisis prevention and management are outlined in section 6. Then, after a brief look at prospects for recovery, the paper concludes with immediate steps that might help resolve the current crises; and with proposed reforms to the international monetary system to prevent a recurrence.
Download
PDF Ebook Financial Crisis in East Asia: Bank Runs, Asset Bubbles and Antidotes
Posted in :
