Asian Crisis in 1997By – Hitendrasinh ZalaKetan Changani Ruchi GattaniShoaib QureshiVishal Bhatnagar

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

CausesPoor Regulation of the Economy

Over-Inflated Asset Prices

Macroeconomic Policy: Fixed Exchange Rates

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

HistoryChina reformed its export policies

The Southeast Asian countries growth was majorly due to investments & not the actual growth

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

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

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

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

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

Queries

THANK YOU