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Asian and European Financial Crises Compared

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  • Edwin M. Truman

    ()
    (Peterson Institute for International Economics)

Abstract

The European and Asian financial crises are the two most recent major regional crises. This paper compares their origins and evolution. The origins of the two sets of crises were different in some respects, but broadly similar. The two sets of crises also shared similarities in their evolution, but here the differences were more significant. The European crisis countries received more external financial support, despite the fact that they involved more solvency issues while the Asian crises involved more liquidity issues. On balance, the reform programs in the European crises were less demanding and rigorous than in the Asian crises. Partly as a consequence, the negative impacts on the global economy have been larger. Author Edwin M. Truman draws three lessons from this analysis: First, history will repeat itself; there will be other external financial crises. Second, other countries have a stake in appropriate crisis management. Third, the International Monetary Fund (IMF) and other countries were mistaken in treating the European crises as individual country crises rather than as a crisis for the euro area as a whole that demanded policy conditionality on all members of the euro area.

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP13-9.

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Date of creation: Oct 2013
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Handle: RePEc:iie:wpaper:wp13-9

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Keywords: financial crises; Asian financial crises; European financial crises; International Monetary Fund; European Central Bank; crisis management; policy coordination; macroeconomic policies; banking policies;

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  1. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
  2. C. Fred Bergsten & Jacob Funk Kirkegaard, 2012. "The Coming Resolution of the European Crisis," Policy Briefs PB12-1, Peterson Institute for International Economics.
  3. Nicolas Veron & Guntram B. Wolff, 2013. "From Supervision to Resolution: Next Steps on the Road to European Banking Union," Policy Briefs PB13-5, Peterson Institute for International Economics.
  4. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series WP11-9, Peterson Institute for International Economics.
  5. Zsolt Darvas & Jean Pisani-Ferry & Guntram B. Wolff, 2013. "Europe's growth problem (and what to do about it)," Policy Briefs 776, Bruegel.
  6. Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2012. "Guardians of Finance: Making Regulators Work for Us," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017393, December.
  7. Shinji Takagi, 2010. "Applying the Lessons of Asia: The IMF’s Crisis Management Strategy in 2008," Working Papers id:3006, eSocialSciences.
  8. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
  9. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  10. Adam S. Posen & Nicolas Veron, 2009. "A Solution for Europe's Banking Problem," Policy Briefs PB09-13, Peterson Institute for International Economics.
  11. C. Fred Bergsten & Jacob Funk Kirkegaard, 2012. "The Coming Resolution of the European Crisis: An Update," Policy Briefs PB12-18, Peterson Institute for International Economics.
  12. Marcus Noland, 2000. "Avoiding the Apocalypse: The Future of the Two Koreas," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 94.
  13. Bergljot Barkbu & Barry Eichengreen & Ashoka Mody, 2011. "International Financial Crises and the Multilateral Response: What the Historical Record Shows," NBER Working Papers 17361, National Bureau of Economic Research, Inc.
  14. Marcus Noland, 1996. "Restructuring Korea's Financial Sector for Greater Competitiveness," Working Paper Series WP96-14, Peterson Institute for International Economics.
  15. Takagi, Shinji, 2010. "Applying the Lessons of Asia: The IMF's Crisis Management Strategy in 2008," ADBI Working Papers 206, Asian Development Bank Institute.
  16. Noland, Marcus, 2000. "The Philippines in the Asian Financial Crisis: How the Sick Man Avoided Pneumonia," MPRA Paper 55665, University Library of Munich, Germany.
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