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Institutions and Investors: The Politics of the Economic Crisis in Southeast Asia

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  • MacIntyre, Andrew

Abstract

I develop a systematic argument about the politics of the 1997–98 Asian economic crisis. I focus on institutions—specifically, the connection linking the institutional framework of national politics, the policy environment, and investment. I seek to resolve the tension between the literatures on credible policy commitment and policy flexibility, arguing that if either is severely undersupplied, the risk associated with the policy environment rises rapidly for investors. Building on a veto player framework, I develop a simple model of a U-shaped relationship between the number of veto players in a political system and policy risk to investors. Institutional vetoes on executive authority lower policy risk for investors but only up to a point, after which additional veto players promote unwelcome policy rigidity. I illustrate this using four cases: Thailand, the Philippines, Malaysia, and Indonesia, the four main Southeast Asian countries involved in the financial crisis. I argue that the institutional framework of national politics had a powerful and predictable influence on policy responses and investor reactions.

Suggested Citation

  • MacIntyre, Andrew, 2001. "Institutions and Investors: The Politics of the Economic Crisis in Southeast Asia," International Organization, Cambridge University Press, vol. 55(01), pages 81-122, December.
  • Handle: RePEc:cup:intorg:v:55:y:2001:i:01:p:81-122_44
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    Cited by:

    1. Martínez, Juan & Santiso, Javier, 2003. "Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies," MPRA Paper 12909, University Library of Munich, Germany.
    2. Christopher Gandrud & Mark Hallerberg, 2015. "What is a Financial Crisis? Efficiently Measuring Real-Time Perceptions of Financial Market Stress with an Application to Financial Crisis Budget Cycles," CESifo Working Paper Series 5632, CESifo Group Munich.
    3. Ernesto Crivelli & Sanjeev Gupta & Carlos Mulas-Granados & Carolina Correa-Caro, 2016. "Fragmented Politics and Public Debt," IMF Working Papers 16/190, International Monetary Fund.
    4. Jäger, Kai, 2016. "The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation," European Journal of Political Economy, Elsevier, vol. 44(C), pages 79-96.
    5. Mícheál O’Keeffe & Alessio Terzi, 2015. "The political economy of financial crisis policy," Working Papers 888, Bruegel.
    6. Gellert, Paul K., 2005. "The Shifting Natures of "Development": Growth, Crisis, and Recovery in Indonesia's Forests," World Development, Elsevier, vol. 33(8), pages 1345-1364, August.
    7. White, George O. & Hemphill, Thomas A. & Joplin, Janice R.W. & Marsh, Laurence A., 2014. "Wholly owned foreign subsidiary relation-based strategies in volatile environments," International Business Review, Elsevier, vol. 23(1), pages 303-312.
    8. Ha, Eunyoung & Kang, Myung-koo, 2015. "Government Policy Responses to Financial Crises: Identifying Patterns and Policy Origins in Developing Countries," World Development, Elsevier, vol. 68(C), pages 264-281.
    9. David Lake, 2009. "Open economy politics: A critical review," The Review of International Organizations, Springer, vol. 4(3), pages 219-244, September.
    10. Rock, Michael T., 2009. "Has Democracy Slowed Growth in Asia?," World Development, Elsevier, vol. 37(5), pages 941-952, May.

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