Lecture 22 - Spring 2010 - The Asian Financial Crisis,...

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Unformatted text preview: The Asian Financial Crisis, 1997-1999 Early 1997 : Major industrial and finance company bankruptcies in Korea and Thailand July, 1997 : Floating of Thai baht and its rapid depreciation. August, 1997 : Floating of Indonesian rupiah and depreciation. Late 1997 July 1998 : Contagion effect spreads to economies and currencies of Malaysia, Philippines, Korea. 1998 : Further contagion effect in Asian countries Singapore, Japan and elsewhere: Russia, Venezuela, South Africa, Brazil. Professor David Lee AEM-ECON 2300 The Asian Financial Crisis, 1997-1999 General effects: 1. Decline in stock markets and real estate markets up to 65- 75% among five main affected countries. Professor David Lee AEM-ECON 2300 Professor David Lee AEM-ECON 2300 The Asian Financial Crisis, 1997-1999 General effects: 1. Decline in stock markets and real estate markets up to 65- 75% among five main affected countries. 2. Rapid depreciation of currencies 40-84% among five main countries Professor David Lee AEM-ECON 2300 Professor David Lee AEM-ECON 2300 Professor David Lee AEM-ECON 2300 The Asian Financial Crisis, 1997-1999 General effects: 1. Decline in stock markets and real estate markets up to 65- 75% among five main affected countries. 2. Rapid depreciation of currencies 40-84% among five main countries 3. Recession in affected countries: fall in GDP (13-15% in Indonesia), rise in unemployment, etc. 4. Impacts on global economy Professor David Lee AEM-ECON 2300 Response of IMF Economic Stabilization Programs Mulitiple objectives Prevent default on foreign loans Limit currency depreciation & stabilize currencies Preserve fiscal balance & avoid large budget deficits Limit inflation Rebuild foreign exchange reserves Reform banking sector and domestic economy Restore credit worthiness and confidence Limit decline in production and economic growth Professor David Lee AEM-ECON 2300 Major Policy Components of IMF-based Programs...
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Lecture 22 - Spring 2010 - The Asian Financial Crisis,...

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