Lessons from East Asia's Crisis and Recovery
This paper provides an empirical analysis of the currency crisis and recovery in three East Asian countries, Malaysia, Thailand and South Korea. Using macro economic data for the three countries over a 13 year period, 1990 – 2002, the paper examines the factors leading to the crisis, the policy response to the crisis, an evaluation of their recovery and the lessons that can be learnt. During the seven year period prior to the crisis, all three countries experienced very rapid GDP growth. Collectively, average annual GDP growth was 11.5%. This growth however was fueled by rapid monetary growth, current account deficits, negative S-I gaps and short term capital inflows. As a result, serious structural weaknesses were built. Overvalued exchange rates enhanced the vulnerabilities. The two year period of crisis, saw sharply negative GDP growth in all three countries. These were accentuated by the contractionary policies. While Thailand and South Korea had to turn to the IMF and adopt the IMF package, Malaysia took the ‘unorthodox’ route of capital controls and currency peg. The paper argues that despite different policy stance the underlying responses were the same. All three countries experienced a V-shaped recovery. Malaysia’s controversial policies appears to have provided no additional advantage. The paper concludes with an outline of key lessons for policy makers from the experience of the three countries.
|Date of creation:||Dec 2004|
|Date of revision:|
|Publication status:||Published in Asia - Pacific Development Journal 2.11(2004): pp. 81-102|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- 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.
- 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.).
- Kenneth Kang & Hong Liang & Henry Ma & Anthony J. Richards & Ajai Chopra & Meral Karasulu, 2001. "From Crisis to Recovery in Korea; Strategy, Achievements, and Lessons," IMF Working Papers 01/154, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:12759. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.