ANALYSIS OF THE ASIAN CRISIS
From Dickinson College Wiki
INTRODUCTION
- An analysis of the East Asian crisis.
- A brief overview of how East Asia was before the crisis and its situation after the crisis.
- Its impact on the rest of the world.
OVERVIEW OF EXCHANGE RATES
- Exchange rates are quoted as foreign currency per unit of domestic currency or domestic currency per unit of foreign currency.
- Exchange rate allows us to denominate the cost or price of a good or service in a common currency.
- Depreciation is a decrease in the value of a currency relative to another currency.
- Appreciation is an increase in the value of a currency relative to another currency.
CHRONOLOGY OF EVENTS
Map showing how the crisis spread
THE FOREIGN EXCHANGE MARKET
- It is the financial market where exchange rates are determined.
- Participants of the foreign exchange market are:
- Commercial banks and other depository institutions: transactions involve buying/selling of bank deposits in different currencies for investment.
- Non-bank financial institutions (pension funds, insurance funds) may buy/sellforeign assets.
- Private firms: conduct foreign currency transactions to buy/sell goods, assets or services.
- Central banks: conduct official international reserves transactions.
CAUSES OF THE ASIAN CRISIS
Overbuilding of real estate.
Decrease in stock prices due to the drop in real estate prices.
The deterioration in the balance sheet of banks due to increasing loan losses.
Adverse selection and moral hazard problems.
Increase in interest rates.
Increase in uncertainty.
Unsustainable current account deficits.
Current account shows international transactions that involve currently produced goods and services
Over-dependence on short-term foreign funds.
Poor regulation of the economy.
Over-inflated asset prices.
Macroeconomic policy: Fixed exchange rates.
COUNTRYWISE EXPLAINATION OF THE CRISIS
Thailand
Philippines
Hong Kong
South Korea
Malaysia
Indonesia
Singapore
People's Republic of China
The United States and Japan
Argentina
Mexico
Other Parts of South America
IMF AND THE CONTROVERSY BEHIND IT
OVERALL IMPACT OF THE ASIAN CRISIS
OUR CONCLUSION AND ANALYSIS ON THE TOPIC
SOURCES
- Krugman's articles
- Wikipedia
- House of Commons research paper
- Economics of Money, Banking and Financial Markets
- International Economics Theory and Policy
- Articles from the United Nations Development Program
