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Another Look at Origins of the Asian Crisis: Tests of External Borrowing Constraints

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  • MIYAO Ryuzo

Abstract

The existing discussions about origins of the Asian crisis can be summarized into two broad views: "economic fundamentals" view and "financial panic" view. This paper attempts to distinguish these two views empirically by testing external solvency of the country using intertemporal borrowing constraints. It adopts the procedures developed by Ahmed and Rogers (1995) and Trehan and Walsh (1991) and examines three affected countries: Thailand, Indonesia and Korea. The evidence indicates that while the external solvency condition was generally satisfied in Indonesia and Korea in the pre-crisis period, it was not the case for Thailand with a sample extending to the 1990s when massive capital inflows took place. This suggests that economic fundamentals were the main origins of the Thai crisis while a financial panic was a more plausible explanation of Indonesian and Korean crises.

Suggested Citation

  • MIYAO Ryuzo, 2002. "Another Look at Origins of the Asian Crisis: Tests of External Borrowing Constraints," ESRI Discussion paper series 011, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:011
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    Cited by:

    1. Eiji Ogawa & Takeshi Kudo, 2007. "Possible depreciation of the US dollar for unsustainable current account deficit in the United States," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(04), pages 24-30, January.
    2. Ryuzo Miyao, 2004. "Economic Fundamentals or Financial Panic? An Empirical Study on the Origins of the Asian Crisis," Discussion Paper Series 151, Research Institute for Economics & Business Administration, Kobe University.
    3. Eiji Ogawa & Takeshi Kudo, 2007. "Possible depreciation of the US dollar for unsustainable current account deficit in the United States," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(4), pages 24-30, January.

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