28 The Asian Crisis

28 The Asian Crisis - The Asian Crisis Perry Sadorsky...

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The Asian Crisis Perry Sadorsky
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Background For three decades before the Asian financial crisis, the countries of Indonesia, Korea, Malaysia, and Thailand experienced strong economic performance (high GDP growth, low inflation, high savings rates, high export growth rates, and reasonable macroeconomic stability).
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Export growth in particular was very strong Between 1990 and 1996; Malaysia’s exports increased by 18% annually. Thai exports increased by 16% annually. Singapore’s exports increased by 15% annually. Hong Kong’s exports increased by 14% annually. South Korea’s exports increased by 12% annually.
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Exports played an important role in the economic growth of these countries Over a twenty year period, the type of exports shifted from basic materials like clothing, shoes, and textiles, to more complicated products like automobile parts, semiconductors, and consumer electronics.
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The boom in investment The wealth created by export led growth led to an investment boom in residential and commercial property. The investment boom led to a massive build up of properties associated with shopping malls, condos, apartments, industrial parks, golf courses and country clubs. Blame it on “Golf”
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Financing the investment boom Strong economic performance made it easy to borrow money from banks, international investors and governments for investment. The South East Asian (SEA) banking community was operating in a manner considered weak (less attention to the specific details of assets and liabilities, poor corporate governance, lack of transparency) by European and North American standards.
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This note was uploaded on 09/25/2010 for the course ECON ECON 2000 taught by Professor Perrys during the Fall '09 term at York University.

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28 The Asian Crisis - The Asian Crisis Perry Sadorsky...

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