The currency and market turmoils in East Asia over the last nine months are every bit as much political crises as they are economic ones. Indeed, the political manifestations of these events may linger long after the necessary economic reforms have been introduced to return at least a semblance of economic normalcy to the region. In this paper I attempt to identify and assess some of the longer term political implications. I try to do so through what I think are Asian tinted lenses rather than Anglo American ones. As such, the paper offers an alternative reading of the East Asian economic crisis to that which exists in the mainstream of western policy analysis. It may also appear partial. But perceptions matter in politics and the perceptions I wish to present are, I would suggest, close to the hearts of many influential members of the East Asian public and private sector policy making elites. As such they are likely to influence the future of national economic policies in the region.
In section one, while accepting that particularist explanations have to apply on a country by country basis, the paper outlines those aspects of the crisis that appear common to all the countries notably, Thailand, South Korea, Indonesia and to a lesser extent Malaysia and the Philippines affected to-date. It also highlights the importance of the silent but fundamental role of Japan as a factor in the crisis. In addition, and notwithstanding the real/ material explanations of the crisis, it argues in a highly contentious fashion I concede that the crisis is in large part an ideological one that reflects a western conceptual inability to deal with the resistance of the Asian model of economic development to converge to, and conform with, an Anglo American form of capitalism.
Credit risk and market conditions are inherently linked. This link manifests itself in multiple channels. It has been documented that default probabilities and recovery rates vary through business cycles (see, e.g., Altman (1983), Acharya, Bharath, and Srinivasan (2007), Du-e, Saitaand Wang (2007), and Pesaran, Schuermann, Treutlerand Weiner (2006))). Market conditions can alsoafiectthe impact off firm characteristics on default probability and credit spread, because economically sensitiveflrms should beneflt more in economic expansions and sufiermorein economic recessions. Traditional structural models based on the seminal Merton (1974) model, however, have generally not properly accounted for these inherent connections and have consequently failed to match the levels of the observed credits spreads ("the credit spread puzzle").
I wrote most of what you are about to read in 1999, when I first issued this book as a private gift to only 35 people. More miracles have happened since then. Here are a few of them:
* When I first wrote this book and described the car of my dreams, the car of my dreams at that time was a Saturn. I’ve now upgraded my dream and my car. I’m now driving a BMW Z3 2.8 Roadster. I’ve never in my life had so much fun driving!!! As I grew in my life, and became more bold about going for my dreams, I also naturally wanted a different vehicle. I was led to the Z3, which symbolizes the major changes in my life. And it is a hoot to drive, as well! You truly can have anything you can imagine.
