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

Asian Financial Crises 1997 - Essay ExampleSome of the worst suffering economies like Indonesia, Malaysia, Singapore, and Thailand were the ones that were conquestfully integrated into the world economy at that time. Therefore, a shift started taking place 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 development and economy. But suddenly there were indications from Japan that in dictate to defend the yen, it might raise the interest rates. The statement itself to this effect set off a chain reaction amongst the international investors in the S asideh-East Asian region. They started offloading the local currencies, before it was too late. USA, had a big stake in this region, therefore US also joined Japan in the campaign to save smart from go downing further and started buying yen to stop the precipitous fall (Sanger, 1998). But the Yen kept falling with even some Japanese investors preferring to transfer their Yen into other currencies because of liberalized financial rules. Subsequently, there were two musical rhythms of currency depreciation. Thai baht, Malaysian ringgit, Philippine 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. selenium 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, p olitical, and economic environment with equally damaging impact on intra- and extra-regional international relationsThe banking system was the worst affected, for example at that to the highest degree 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 basic 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. Effects of t he crisis on both the United States and the world, and iv. The role, operations, and replenishment of funds of the transnational Monetary Fund. On the other hand 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