Asian Financial Crises 1997 Essay Example | Topics and Well Written Essays - 2750 words

Asiatic Financial Crises 1997 - Essay ExampleSome of the worst poor economies like Indonesia, Malaysia, Singapore, and Thailand were the ones that were successfully integrated into the public economy at that time. Therefore, a shift started taking jell in economists opinion on globalization (Piasecki & Wolnicki, 2004). Globalization started in this region by early 1990s and by the mid-1990s, the success appeared to have entered deep into the economies. Openness through globalization and regional integration came to be known as the factors affecting phylogeny and economy. But suddenly there were indications from Japan that in order to defend the yen, it might forward the elicit rates. The statement itself to this effect set off a chain reaction amongst the foreign investors in the southeastern Asian region. They started offloading the local currencies, before it was too late. USA, had a big stake in this region, therefore US overly joined Japan in the campaign to save Yen fro m f wholeing further and started buying yen to stop the precipitous fall (Sanger, 1998). But the Yen kept falling with even about Japanese investors preferring to convert their Yen into other currencies because of liberalized financial rules. Subsequently, there were two rounds of currency depreciation. Thai baht, Malaysian ringgit, Filipino peso, and Indonesian rupiah felt the heat in the first round while the Taiwanese dollar, South Korean won, Singaporean dollar, and Hong Kong dollar were devalued in the second round. The respective governments tried to pump in all their foreign currency reserves into the local market in order to save their own currencies, but to no avail. The stock markets kept hitting rock bottom. South-east Asian nations then tried to raise interest rates, which, in turn, slowed down the economic growth. This crises was being termed as Asias second biggest event1 since World War II, resulting in seriously affecting the domestic social, political, and econom ic environment with equally damaging impact on intra- and extra-regional outside(a) relationsThe banking system was the worst affected, for example at that most of the 240 Indonesian banks turned insolvent, while some other well-run banks like Bali were trapped in bad debt (Landler, 1998). Banks were the worst affected with the crisis. With the excess of local currency in the local markets its value was bound to head southwards. And thats exactly what happened. Stock market too went in a bearish mode and stock prices started tumbling down. Nanto (1998) points out that the reasons which brought about this crisis included four fundamental problems or issues i. A shortage of foreign exchange that caused the value of currencies and equities in Thailand, Indonesia, South Korea and other Asian countries to fall dramaticallyii. Inadequately developed financial sectors and mechanisms for allocating capital in the troubled Asian economies, iii. personal effects of the crisis on both the Un ited States and the world, and iv. The role, operations, and replenishment of funds of the International Monetary Fund. On the other die the Secretary General of UNCTAD, states (Piaseck & Wolnicki, 2004) that the two main causes of the South East Asian crises were i. Excessive openness to the world economy, andii. Inability to manage this openness, on