The Asian Currency Crisis - A Fait Accompli?
This paper analyzes the East Asian Currency Crisis to examine what factors led to the crisis and the differential impact across countries. Empirical data of 7 Asian countries over the period 1990 – 1996 is examined. The sample of seven countries is divided into two categories; crisis countries and affected countries. Comparison of several economic indicators is made between these two categories to determine what factors led to the severe consequences in the crisis countries as opposed to affected countries, all of which were subject to contagion. The crisis countries were found to have had aggressive growth policies that were fuelled by reflationary strategies; particularly rapid monetary growth and capital inflows. With higher relative inflation and repressed interest rates, exchange rate equilibrium as dictated by purchasing power and interest rate parities were out of line given pegged exchange rates. The currencies had become overvalued. The result being current account deficits that were financed by capital inflows, increasingly in the form of short term foreign currency denominated loans. The combined impact of all of this had been to increase the crisis countries’ vulnerability to a speculative attack and a resulting self-fulfilling crisis.
|Date of creation:||Dec 1997|
|Date of revision:|
|Publication status:||Published in Malaysian Journal of Economic Studies 1-2.34(1997): pp. 67-92|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rodrigo O. Valdes & Ilan Goldfajn, 1997.
"Are Currency Crises Predictable?,"
IMF Working Papers
97/159, International Monetary Fund.
- Otker, Inci & Pazarbasioglu, Ceyla, 1997. "Speculative attacks and macroeconomic fundamentals: evidence from some European currencies," European Economic Review, Elsevier, vol. 41(3-5), pages 847-860, April.
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"Currency crashes in emerging markets: an empirical treatment,"
International Finance Discussion Papers
534, Board of Governors of the Federal Reserve System (U.S.).
- Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
- Subir Lall, 1997. "Speculative Attacks, Forward Market Intervention and the Classic Bear Squeeze," IMF Working Papers 97/164, International Monetary Fund.
- Berthelemy, J C & Varoudakis, A, 1995. "Thresholds in Financial Development and Economic Growth," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(0), pages 70-84, Suppl..
- Calvo, Guillermo A. & Mendoza, Enrique G., 1996.
"Mexico's balance-of-payments crisis: a chronicle of a death foretold,"
Journal of International Economics,
Elsevier, vol. 41(3-4), pages 235-264, November.
- Guillermo A. Calvo & Enrique G. Mendoza, 1996. "Mexico's balance-of-payments crisis: a chronicle of death foretold," International Finance Discussion Papers 545, Board of Governors of the Federal Reserve System (U.S.).
- McKinnon, Ronald I. & Pill, Huw, 1998.
"International Overborrowing: A Decomposition of Credit and Currency Risks,"
Elsevier, vol. 26(7), pages 1267-1282, July.
- Ronald I. McKinnon & Huw Pill, 1998. "International Overborrowing: A Decomposition of Credit and Currency Risks," Working Papers 98004, Stanford University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:12756. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.