This presentation provides an overview of the Asian Financial Crisis of the late 1990s. It discusses the crisis timeline, including Thailand allowing the baht to float in July 1997 which triggered further currency devaluations across Asia. The document outlines weaknesses in Asian economies that were exposed by the crisis, such as weak banking regulation and reliance on short-term capital flows. It also discusses the impact on various countries and regions, including rising interest rates, falling stock prices, and currency depreciation. The presentation concludes with 14 case study questions analyzing different aspects of the crisis.
This study presentation looks at the causes and consequences of different types of financial crisis. It also focuses on the Hyman Minsky theory of financial instability in a capitalist economic system.
This is a recording of a revision webinar exploring some of the causes of financial crises in developed and emerging market countries. There are many different types of crises ranging from currency/external debt crises to disturbances in banking systems.
This study presentation looks at the causes and consequences of different types of financial crisis. It also focuses on the Hyman Minsky theory of financial instability in a capitalist economic system.
This is a recording of a revision webinar exploring some of the causes of financial crises in developed and emerging market countries. There are many different types of crises ranging from currency/external debt crises to disturbances in banking systems.
Overview about The financial Crisis in 2008. The presentation with 4 main points: reasons, development (also including responses), and consequences.
We hope that this is an easy source of information for you to understand this crisis.
The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion.
Financial contagion refers to “the spread of market disturbances -- mostly on the downside -- from one country to the other, a process observed through co-movements in exchange rates, stock prices, sovereign spreads, and capital flows." Financial contagion can be a potential risk for countries who are trying to integrate their financial system with international financial markets and institutions. It helps explain an economic crisis extending across neighboring countries, or even regions.
[SERIES 4/4] The Global Financial Crisis (2007 - 2009)
from the Frederic Mishkin's The Economics of Money, Banking, and Financial Markets
Financial Crises on Advanced Economies Chapter
Outline:
SERIES 1: Factors Causing Financial Crises
SERIES 2: Dynamics of Financial Crises in Advanced Economies
Series 3: The Great Depression
SERIES 4: The Global Financial Crisis of 2007 - 2009 (The Great Recession)
Other Sources:
The Causes and Effects of the 2008 Financial Crisis
https://www.youtube.com/watch?v=N9YLta5Tr2A
A Case Study Analysis on the Asian Financial Crisis of 1997 and Zapa ChemicalsSadman Ahmed
Asian Financial Crisis of 1997:-
The Asian crisis was one of the worst financial disasters in the history of Thailand. The investors moved away large sums money away, inflation spiraled out of control, and it ultimately put pressure on the exchange rates of the Baht. Due to Thailand’s problems alone, the effect of the crisis spread along different countries in Asia. The impacts prove how integrated the economies of today are. Much of the fault lies on the failed policies of the government and weak regulatory regime.
Zapa Chemicals (risk management)
The exchange rate exposure and the legal hurdles can be quite a burden when transferring funds across the borders. In the case of Zapa Chemicals, the tax filing problem did not help them to transfer funds. They didn’t know when exactly the funds would be available for receiving. The risk management of the firm is quite a hefty task for foreign companies to successfully pursue.
Overview about The financial Crisis in 2008. The presentation with 4 main points: reasons, development (also including responses), and consequences.
We hope that this is an easy source of information for you to understand this crisis.
The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion.
Financial contagion refers to “the spread of market disturbances -- mostly on the downside -- from one country to the other, a process observed through co-movements in exchange rates, stock prices, sovereign spreads, and capital flows." Financial contagion can be a potential risk for countries who are trying to integrate their financial system with international financial markets and institutions. It helps explain an economic crisis extending across neighboring countries, or even regions.
[SERIES 4/4] The Global Financial Crisis (2007 - 2009)
from the Frederic Mishkin's The Economics of Money, Banking, and Financial Markets
Financial Crises on Advanced Economies Chapter
Outline:
SERIES 1: Factors Causing Financial Crises
SERIES 2: Dynamics of Financial Crises in Advanced Economies
Series 3: The Great Depression
SERIES 4: The Global Financial Crisis of 2007 - 2009 (The Great Recession)
Other Sources:
The Causes and Effects of the 2008 Financial Crisis
https://www.youtube.com/watch?v=N9YLta5Tr2A
A Case Study Analysis on the Asian Financial Crisis of 1997 and Zapa ChemicalsSadman Ahmed
Asian Financial Crisis of 1997:-
The Asian crisis was one of the worst financial disasters in the history of Thailand. The investors moved away large sums money away, inflation spiraled out of control, and it ultimately put pressure on the exchange rates of the Baht. Due to Thailand’s problems alone, the effect of the crisis spread along different countries in Asia. The impacts prove how integrated the economies of today are. Much of the fault lies on the failed policies of the government and weak regulatory regime.
Zapa Chemicals (risk management)
The exchange rate exposure and the legal hurdles can be quite a burden when transferring funds across the borders. In the case of Zapa Chemicals, the tax filing problem did not help them to transfer funds. They didn’t know when exactly the funds would be available for receiving. The risk management of the firm is quite a hefty task for foreign companies to successfully pursue.
The Asian Financial Crisis, Bosnia & Organizational Jeet Kune Do or Culture, ...VSee
An inspirational talk on the importance of creating a meaningful enterprise culture and establishing key organizational habits that can lead to business growth & success - from the Telehealth Failures & Secrets To Success Conference: vsee.com/telehealth-failures-conference
In the aftermath of the Asian crisis of 1997, a number of rapid assessments on the extent and nature of the social impact appeared. They brought out the human cost of the crisis in bolder relief. One such study, launched in the last quarter of 1998, was conducted by ADB. It was designed to assist in devising policy responses to the social crisis and identifying reforms that would strengthen social protection systems in the longer term. It covered Indonesia, the Republic of Korea, the Lao Peoples' Democratic Republic, Malaysia, Philippines, and Thailand. It sketched the transmission of social impacts from the crisis, analyzed the crisis effects on prices and employment, discussed the impact on inequality and poverty, looked at human development in terms of education, health, and family planning, touched on social capital, and looked at the environment.
September 11, 2013. This presentation I made at the Fellowship Dinner for Chartered Wealth Managers in Manila. The idea of this presentation was to show CWM member, how to look around you and get information. I used Time magazine cover to build the investment climate over the last few years. Second Rule, reduce the use of charts in the investment talks, most investors can not comprehend the X axis and Y axis of a graph in a few seconds and understand the implication. Although, I must admit the pdf version without the relevant talk along with the slides, appears a bit dry.
Bubble Spotting - The East Asia Currency and Debt crisis of 1997Benjamin Van As
During the 1990s, various Eastern Asia economies grew at double-digit figures, and exports grew at well over 10% pa. in some cases.
Then the party ended with a bang as the Currency and Debt Bubble popped, the impact of which could be felt in markets around the world.
This presentation (which forms part of a larger series on Market Bubbles) gives a short overview on what happened.
Will the US Rebound Cause Another Emerging Markets Crisis?Brien Desilets
Going back to the 1920s we find evidence of emerging market financial crises caused by events in the US. The financial crisis of 2008-2009 was different for emerging markets than previous crises. Current accounts were generally in surplus or balanced. Many emerging market leaders have already complained about the Federal Reserve’s Quantitative Easing program, believing that loose monetary policy in the US is fueling bubbles not only in global commodities but in emerging market equities and real estate.
Presentation talks about the crisis faced by Korea,Indonesia,Malaysia.
Some of the important reasons being BOP Deficits and Inefficient Financial Systems, drop in GDP and increase in Unemployment rate etc.
A situation in which the wealth of a nation or State or country experiences a sudden downturn brought on by a financial crisis. An economy facing an economic crisis will most likely experience a falling national output, a drying up of liquidity and inflation/deflation. An economic crisis can take the form of a recession or depression.
What are the main causes of and contributing factors to internationa.pdfanaxeetech
What are the main causes of and contributing factors to international financial crises? How can
they be resolved? How can they be prevented? Answer this question in the context of the Asian
Crisis of 1997.
Solution
Causes of Asian financial crisis-. Firstly, huge amounts of foreign capital became readily
available at relatively low interest rates, as investors in search of fresh opportunities shifted huge
amounts of capital into Asia. As under all boom cycles, stock and real estate prices in Asia
increased initially, thus attracting further funds. But, domestic allocation of borrowed foreign
capital was inefficient due to weak banking systems, inefficient corporate governance, and
inadequate transparency of financial sector. Insufficient absorptive capacity also added to the
inefficient allocation of foreign capital. Secondly, the economies\' exchange rate regime was
fixed hence giving borrowers an illusionary sense of security, encouraging them to go for dollar-
denominated borrowings.
The huge capital inflows plus weakening exports were reflected in increasing current account
deficits. Also, a substantial part of the capital inflows was in the form of short-term borrowing,
making these economies prey to external shocks.
Once the trigger started in Thailand , other markets overreacted and the crisis spread.
Remedies.
Asian Financial Crisis in 1997
Asia before Financial Crisis
Beginning of Asian Financial Crisis
Affected countries from Asian financial Crisis
End of Asian Financial Crisis
IMF role during Asian financial crisis
3 Causes of Asian Financial Crisis
Impact of Asian Financial Crisis to:
Thailand
Philippines
Malaysia
Japan
How these countries overcame the Crisis
Current developments to Avoid future financial crisis
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
3. Group-1
Name
Sunanda Sarker
Md. Foysal Ahmed
A.S.M. Misbaul Islam
Md. Ataur Rahman
A. B. M. Kalim Ullah
Ahsanul Karim
Roll No.
161201
161204
161220
161221
161245
161251
4. Agenda..
Crisis in Thailand
Crisis timeline
The dilemma
Asian
Weaknesses
Impact of Asian
Crisis on different
countries
Case Questions
5. Countries involved..
Thailand
Singapore
Philippine
Taiwan
Indonesia
Hong Kong
Russia
South Korea
China
Japan
Latin America
Europe
6. Thailand Case
May 1997: Thailand spends billions of its foreign reserves to defend the
Thai baht against speculative attacks
In case of Thailand:
Allowing too many short-term capital flows to accumulate with a high
degree of currency speculation,
Outflow of funds expedited the weakening of the bath, as foreign
investors exchanged theirbaht fortheirhome currencies,
Sustaining a fixed exchange rate when it was no longersuitable,
Lack of sufficient risk management system at the national level as well
as regional level in case of bank lending (defaulted loan piled up over
$30 billion),
Products were not priced as competitively to US importers,
Concerns of large current account deficits,
Weakness in the Thai financial system, Thai govt.’s heavy borrowing
made the debt expensive to public.
Speculative attacks brings down investor confidence causing- “capital
flight”
7. Crisis Timeline..
July 1997
Thailand is forced to devalue the baht, which
drops the value of the baht by as much as 20%--
a record (had actually attempted a 15%
controlled devaluation)
Malaysia’s central bank intervenes to defend
the ringgit.
The Philippine peso is devalued. Indonesia
widens its trading band forthe rupiah in a move
to discourage speculators
The Singapore dollar starts a gradual decline.
8.
9. Crisis timeline..Contd/.
August1997
Thailand agrees to adopt tough economic
measures proposed by the IMF in return for a
$17 billion loan from the international lender
and Asian nations. The Thai government
closes 42 ailing finance companies and
imposes tax hikes as part of the IMF's
insistence on austerity
Indonesia abandons the rupiah's trading band
and allows the currency to float freely,
triggering a plunge in the currency
10. Crisis timeline..Contd/.
October1997
Indonesia asks the IMFand World Bank forhelp after
the rupiah falls more than 30% in two months,
despite interventions by the country's central bank to
prop up the currency
Hong Kong's stock index falls 10.4% afterit raises
bank lending rates to 300% to fend off speculative
attacks on the Hong Kong dollar. The plunge on the
Hong Kong Stock Exchange wipes $29.3 billion off the
value of stock shares.
The South Korean won begins to weaken
The IMFagrees to a loan package forIndonesia that
eventually swells to $40 billion. In return, the
government closes 16 financially insolvent banks and
11. Crisis timeline..Contd/.
November1997
Bank of Korea allows the won to fall below 1000 against
the dollar(record low)
December1997
IMF approves a $57 billion bailout package to the South
Korea
As part of IMF economic restructuring plan, the Thai
government closes 56 insolvent finance companies (30,000
white collarjobs lost)
South Korea’s first president elected from country’s
opposition party. In days the won hits new low.
$3 billion emergency loan released by the world bank ,
12. Crisis timeline..Contd/.
January 1998:
Release of Indonesia budget plan pulls the rupiah to an all-
time low
Inflation rises. Prices for basic food staples in Indonesia
increase by as much as 80%
The rupiah plunges to 12,000 rupiah against the dollar
June 1998
Japan announces that its economy is in a recession
Yen falls to levels near 144 to the dollar. US treaury and
Federal reserve intervenes to prop up the yen
August 1998
Wall Street reacts; the Dow plunges 300 points in its third
biggest loss
14. How Interest rates changed during the Asian Crisis
(Annualized interest rates as of June 1997 and of
June 1998 are represented by Number before
slash and Number after slash respectively)
15. Dilemma..
Drop in currencies
Raise import prices leading to
inflation threat
Threat that potentially viable banks
and companies may become bankrupt
Defend the currency
would mean to raise interest rates
Threat of economic slump resulting in
the failure of banks
16. Asian Weaknesses..
Weaknessesthat becameapparent after thecrisis:
1. Productivity: economic expansion beforecrisis
later explained by therapid growth of production
inputs(capital and labor) – but relatively little
increasein productivity
2. Banking Regulation: Ineffectivegovernment
supervision
3. Exchange rate regimes- Mostly pegged exchange
ratesystem
4. Legal Framework: lack of structured legal
framework to deal with bankruptcy
17. Impact of Asian Crisis All Over
the World ..
Currency value declined
Interest rate increased
Demand and national income reduced
Bad loans piled up
Cost of borrowing increased
Stock prices reduced in Hong Kong
Large firms in Japan announced shut down
Export oriented countries rely on Asian products
heavily affected by this crisis
Bond rating as well as bond price reduced in
Latin America
18. Case Questions..
1. Was the depreciation of the Asian currencies during
the Asian crisis due to trade flows or capital flows?
Why do think the degree of movement over a short
period may depend on whether the reason is trade
flows or capital flows?
2. Why do you think the Indonesia rupiah was more
exposed to an abrupt decline in value than the
Japanese yen during the Asian crisis (even if their
economies experienced the same degree of
weakness)?
3. During the Asian crisis, direct intervention did not
prevent depreciation of currencies. Offer your
explanation for why the interventions did not work.
19. 4. During the Asian crisis, some of the local firms in Asia
borrowed dollars rather than local currency to support local
operations. Why would they borrow dollars when they really
needed their local currency to support operations? Why did
this strategy backfire?
5. The Asian crisis showed that a currency crisis could affect
interest rates. Why did the crisis put upward pressure on
interest rates in Asian countries? Why did it put downward
pressure on U.S. interest rates?
6. It is commonly argued that high interest rates reflect the
expectation of high inflation. Based on this theory, how
would expectations of Asian exchange rates change after
interest rates in Asia increased? Why? Is the underlying
reason logical?
Case Questions..
20. 7. During the Asian crisis, why did the discount of the forward rate of
Asian currencies change? Do you think it increased or decreased?
Why?
8. During the Hong Kong crisis, the Hong Kong stock market declined
substantially over a four-day period due to concerns in the foreign
exchange market. Why would stock prices decline due to concerns
in the foreign exchange market? Why would some countries be
more susceptible to this type of situation than others?
9. On August 26, 1998, the day that Russia decided to let the ruble
float freely, the ruble declined by about 50 percent. N the following
day, called bloody Thursday, stock markets around the world
(including the U.S.) declined by more than 4 percent. Why do you
think the decline in the ruble had such a global impact on stock
prices? Was the market’s reaction rational? Would the effect have
been different if the ruble’s plunge had occurred in an earlier time
period, such as four years earlier?
Case Questions..
21. 10. Normally, a weak local currency is expected to stimulate the
local economy. Yet, it appeared that the weak currencies of
Asia adversely affected their economies. Why do you think
the weakening of the currencies did not initially improve the
economies during the Asian crisis?
11. During the Asian crisis, Hong Kong and China successfully
intervened (by raising their interest rates) to protect their
local currencies from depreciating. Nevertheless, these
countries were also adversely affected by the Asian crisis.
Why do you think the actions to protect the values of their
currencies affected these countries’ economies. Why do
you think the weakness of other Asian currencies against
the dollar and the stability of the Chinese and Hong Kong
currencies against the dollar adversely affected their
economies?
Case Questions..
22. 12. Why do you think the values of bonds issued by Asian governments
declined during the Asian crisis? Why do you think the values of
Latin American bonds declined in response to the Asian crisis?
13. Why do you think the depreciation of the Asian currencies adversely
affected U.S. firms? (There are at least three reasons, each related
to a different type of exposure of some U.S. firms to exchange rate
risk.)
14. During the Asian crisis, the currencies of many Asian countries
declined even though their governments attempted to intervene with
direct intervention or by raising interest rates. Given that the abrupt
depreciation of the currencies was attributed to an abrupt outflow of
funds in the financial markets, what alternative Asian government
action might have been more successful in preventing a substantial
decline in the currencies’ values? Are there any possible adverse
effects of your proposed solution?
Case Questions..
East Asia was a booming part of the world. With high rates of saving and investment; rapidly improving educational levels among the work force; and if not free trade, at least a high degree of openness to and integration with world markets. Capital Market liberalizations 1900s, increased financial transactions through the banks. Shift from an inward-looking, import-substitution development strategy to one that emphasized exports. During the 1990s: massive capital inflows were accumulated progressively along with a high interest rate differential and under fixed exchange rate regime, including capital account deregulation
Although the capital markets were liberalized, the financial sector was poorly managed and underdeveloped. The circumstances worsened through short-term borrowing abroad, primarily to finance long-term projects, leading to currency and maturity mismatches. As a result, a balance-sheet crisis occurred due to sudden capital outflows. The foreign short-term liabilities had exceeded international reserves in 1996. As soon as the baht was floated, foreign debt in local currency overshot, the sovereign rate of Thailand decreased, and then investors’ sentiments were adversely affected. The banks held many short-term liabilities denominated in foreign currencies, and the sharp increase in the value of the liabilities after the devaluation led to a further deterioration in the banks’ balance sheet. In all this, the IMF stepped in and the countries were able to prevent a bank panic by the cushion in aid provided that protected depositors. In all the ability of the bank to lend was sharply reduced. The cost of the bailout for the banking system was more than 15% of GDP in these countries and more than 50% of GDP in Indonesia, about 13% in Philippines. Liquidity crunch from capital flight
Thailand: real estate bubble burst, then the stock market tumbled. It began with a currency crisis even though the nations had weaknesses that only worsened the crisis. George Soros bets on the baht- speculation about a devaluation let to an accelerating loss of foreign reserves. This leads to the speculation against neighboring country currencies- Malaysia, Indonesia and Korea. Crisis worsened by the economic slump in Japan. The economies were highly dependent on trade, partly from the fact that domestic banks and companies had large debts denominated in dollars. Faced with the dilemma that allowing their currencies to drop would raise import prices, leading to inflation As a counterpart to the large capital inflows several of the Asian countries began running large current account deficits
South Korea was the world’s 8 th largest economy, and one of the strongest. But as it had failed to deal with its banking problems, and the market knew that its banks were wea
January 12: Asia’s largest private investment bank, the Hong Kong- based Peregrine Investments, files for liquidation. The company is left badly exposed from its loan in investments in Indonesia. June: Japan and the US spend some $6 billion to buy yen in order to strengthen it. IMF’s efforts of advice on tighter fiscal and monetary policies were intended to stem the capital outflow but actually caused bankruptcies and killed the growth that was essential for private sector recovery.
Drop in currencies make exports attractive but imports more expensive. The east Asian countries were highly dependent on trade. Also domestic banks and companies had large debts denominated in dollars. So a drop in the domestic currency means foreign currency becomes more expensive, relatively increasing the value of the dollar denominated debts even though the debts are the same. The huge influx of foreign capital happened with the market liberalization. The differential in interest rates played in favor of the domestic market and investor began to spend more and more in these economies.
lack of supervision by bank regulators and lack of expertise in screening and monitoring borrowers at banking institutions, losses on the loans began to mount ( An estimated 15% to 35% of all bank loans turned sour in Thailand, Indonesia, Malaysia, and south Korea), causing an erosion of bank’s net worth (capital). As a result of this erosion, banks had fewer resources to lend and this lack of lending eventually led to a contraction in economic activity. Corruption..close ties between business interests and government officials appear to have helped foster considerable moral hazard in lending. All wanted financial liberalization but lacked proper government supervision. Heavy reliance on banks due to underdeveloped capital markets Pegged exchange rate made the adjustment process more difficult