Discuss the causes of the Asian Crisis. Could it have been prevented? Are there any features in the Asian Crisis that are common to crises in Europe in 1992 and more recent ones in Latin America and Russia?

Asian Crisis : The Causes

Introduction

The Asian Miracle ' was too good to be true when the real situation surfaced in 1997 . The Asia Financial Crisis of 1997 broke the pace of progress for most East Asian nations with `tiger ' economies . Beginning with Thailand , the troubles escalated to include other Asian nations apparently enjoying the same prosperity and economic growth in previous years . Many called the phenomenon a contagion because it spread like wildfire across East Asia . Asian countries with sound fundamentals remained unfazed in the crisis . The Asian crisis appeared to

echo the resurgence of currency nightmare that was experienced in Europe in 1992

There were several factors contributing to the 1997 Asian crisis Financial experts had previously warned these countries on their financial structures and practices . It was a bit too late to reform as one country 's currency to the other began their slide and lost value Many lessons could be learned from this economic debacle and it would take a crisis of this magnitude and scale for emerging economies to review their financial and economic policies . The ripple effects of the Asian crisis were felt all over the world as the economies were interconnected globally

To many , the economic miracle was surreal that would eventually crack under the global market pressures . In the attempt of most developing countries to get out of years of non-performing economies , they failed to consider that sound financial practices were essential in sustaining the momentum . The Asian crisis also proved that Asians are resilient and they would eventually recover , now wiser and more cautious in making decisions

The Asian Miracle Standing on Shaky Ground

Jao (2001 ) wrote that the Asian Financial crisis was a combination of series of financial difficulties involving currencies , debt , banking system and asset market crashes (p .16 . The three main Asian countries requiring restructuring as a pre-condition for IMF to extend emergency financial packages were Indonesia , South Korea , and Thailand . These three experienced currency , debt and banking system problems far more substantial compared to their neighbors . The Philippines and Malaysia had currency and debt crises but with less severity compared to the trio . In general , the East Asian markets experienced equity market and property market crashes losing up to 70 of the value from 1997-98

Many also did not foresee that the Asian crisis would snowball to engulf the entire region . A year earlier , the IMF had already observed inconsistencies in Thailand and had advised the country to take precautionary measures on the brewing trouble ahead but it did not anticipate the virulence of the contagion that began in Thailand on July 2 , 1997 (Jao , 2001 ,p .16 . The growth of the Asian economic tigers was much too rapid thereby exposing them to more risks than usual . Optimism on the Asian markets was buoyed by the fact that they grew three to five times the usual rates (Tabb , 1998 ,

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Two new concepts entered the investors ' vocabulary during the downturn The terms overcapacity and deflation dampened investors...