Thoughts Of The Asian Crisis

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Thoughts of the Asian Crisis (1997-1998) In the period between 1997 to 1998, a great economic storm blew the some fast-developing countries, especially Thailand, Indonesia and Malaysia. They had great economic develop before the crisis, but left almost everything at the end of the storm. The most obvious impact by the crisis is the capital outflows and currency devaluation. So, people in those developing countries began to find who should be respond to the crisis. International speculators were good targets to be blamed due to their actives during the crisis. The President of Indonesia, Suharto, even claimed “There are [parties] trying to engineer the fall of the rupiah to the 20,000 level [against the dollar]. It does not make sense.…show more content…
Only blame the speculators by the past experience is not appropriate: East Asian economic structure, fiscal policy of responding the crisis and political structure possibly played more significant roles on aggrandizing this crisis. Admittedly, the active speculators capital operation is the catalyze of the crisis: before the crisis, those 3 Asian countries are quite similar: All of them just endure a great economic progress for the recession of Japan at the early 1990s. The rate of export was gradually carrying a higher weight; the real GDP had more than 8 percentage annual growth constantly. (DeRosa 85) Also, they had a quick credit expansion for wooing the international capital for investment. As for the section of currency exchange, Thailand and Indonesia held the peg to the U.S dollar. Malaysia is little bit different: it did hold float exchange rate but that is essentially a sort of “dirty float” which means the government will affect the direction of exchange rate frequently to keep the exchange rate in a certain range. In anyway, those three countries tried to use relatively sturdy currency policy and quick increasing economic environment to attract international capital. Admittedly, this function quite functioning before the crisis, but there are some potential problems are still unsolved which made their economy not as sturdy as those countries thought once the risk comes. For example:
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