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Crisis, reform and recovery
Shalendra D. Sharma

low inflation also led to a gradual decline in nominal interest rates.5 Third, the real exchange rate was not significantly overvalued. In fact, in the three years prior to the crisis, the real exchange rate was essentially flat. Fourth, the gross domestic savings remained high, exceeding 30 per cent in 1995–96. Fifth, the fiscal deficit, which was about 2.5 per cent of GDP in the early 1980s, was turned into a surplus in 1993 – a position it maintained on the eve of the crisis. Sixth, the government budget was close to being in balance, and between 1990 and 1995, Korea

in The Asian financial crisis
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

to be traded would be sufficient to ward off contagion. The Indonesian government, which received much praise for its swift and decisive response to the crisis, went to great lengths to assure jittery investors “that Indonesia was not Thailand.” Then the unthinkable happened. Indonesia suddenly succumbed to the contagion, and measured by the magnitude of currency depreciation and contraction of economic activity, it emerged as the most serious casualty of Asia’s financial crisis. In fact, with an economic contraction of 15 per cent in output in 1998, Indonesia

in The Asian financial crisis
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

a trigger. The trigger was provided by a loss of confidence on the part of the owners of short-term capital in the Bank of Thailand’s capacity to maintain its fixed exchange rate. Most tragically, this convergence was neither foreordained nor sudden – but had been building up since mid-1996, roughly one year before the baht’s devaluation. 66 Thailand: crisis, reform and recovery Why was this explosive convergence allowed to persist for so long? The answer lies in the political economy of Thailand in the 1990s. Specifically, it is well known that the governments of

in The Asian financial crisis
Crisis, reform and recovery

The Asian financial crisis of 1997-98 shook the foundations of the global economy and what began as a localised currency crisis soon engulfed the entire Asian region. This book explores what went wrong and how did the Asian economies long considered 'miracles' respond, among other things. The combined effects of growing unemployment, rising inflation, and the absence of a meaningful social safety-net system, pushed large numbers of displaced workers and their families into poverty. Resolving Thailand's notorious non-performing loans problem will depend on the fortunes of the country's real economy, and on the success of Thai Asset Management Corporation (TAMC). Under International Monetary Fund's (IMF) oversight, the Indonesian government has also taken steps to deal with the massive debt problem. After Indonesian Debt Restructuring Agency's (INDRA) failure, the Indonesian government passed the Company Bankruptcy and Debt Restructuring and/or Rehabilitation Act to facilitate reorganization of illiquid, but financially viable companies. Economic reforms in Korea were started by Kim Dae-Jung. the partial convertibility of the Renminbi (RMB), not being heavy burdened with short-term debt liabilities, and rapid foreign trade explains China's remarkable immunity to the "Asian flu". The proposed sovereign debt restructuring mechanism (SDRM) (modeled on corporate bankruptcy law) would allow countries to seek legal protection from creditors that stand in the way of restructuring, and in exchange debtors would have to negotiate with their creditors in good faith.

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Post-crisis Asia – economic recovery, September 11, 2001 and the challenges ahead
Shalendra D. Sharma

to investment grade. The recovery in Hong Kong, China has been equally impressive. The first-quarter growth in 2000 was 14.3 per cent, followed by 10.8 per cent in the second quarter. GDP growth in Singapore of 5.4 per cent in 1999 was partly due to rising productivity levels. Moreover, Singapore experienced a rapid growth of its information technology industry – no doubt benefiting from the government’s policy of transforming the island republic into a “wired” economy. Malaysia, the Philippines and Thailand grew at 5.4, 3.2 and 5.2 per cent respectively in the first

in The Asian financial crisis
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The evolving international financial architecture
Shalendra D. Sharma

. The goal was to expeditiously formulate and implement measures to prevent (or at least mitigate) the risk of future crises and to cope more effectively with those that still occur. At the Halifax Summit of 1995, the G-7 governments made a number of recommendations to this effect. Most notably, they urged the IMF to intensify its surveillance of its members’ policies and to send explicit messages to governments that seem to be avoiding the necessary policy reforms. In addition, the G-7 asked the IMF to set standards for the publication of economic and financial data

in The Asian financial crisis
Why China survived the financial crisis
Shalendra D. Sharma

IMF package for Thailand. Similarly, 252 Why China survived the crisis Singapore’s minister for information, the indefatigable George Yeo, while accusing Japan of abdicating its global responsibilities, noted that “the determination of the Chinese government not to devalue the renminbi in order not to destabilize Asia further will long be remembered” (Kelley 1998, 28). Another observer noted that the RMB was a “pillar of stability” in the region (Dassu 1998). How did China respond to the Asian financial crisis? Why did China come through such a severe region

in The Asian financial crisis
Richard R. Nelson

it likely would be best to rely centrally on other basic organisational modes, with markets in an ancillary role. This argument clearly flies in the face of conventional wisdom. Hasn’t market organisation proved to be a general purpose way of governing economic activity? Haven’t we learned that markets work best when there is minimal regulation or other interference from government? And hasn’t negative experience with forms of economic organisation that repress markets and use other mechanisms ruled out serious consideration of nonmarket alternatives? Market

in Market relations and the competitive process
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Issues, debates and an overview of the crisis
Shalendra D. Sharma

sudden collapse of the Mexican peso in December 1994, and more recently, the Asian financial crisis that was set off when the Bank of Thailand devalued the baht on July 2, 1997.1 The unexpected meltdown of the Thai economy and the contagion (the so-called Asian flu) spread with unprecedented ferocity, and, by the end of August 1997, the currencies of three of Thailand’s neighbors, Malaysia, Indonesia and the Philippines, had all been devalued substantially (see Table 1.1), despite vigorous efforts by these governments to stop their currencies from falling.2 During

in The Asian financial crisis
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Oonagh McDonald

government couldn't put any money into the transaction, Barclays should focus on Lehman's troubled assets so we could discuss realistically how they could get a deal done’. 6 Meanwhile, both Paulson and Geithner hoped that Ken Lewis, CEO of Bank of America, would buy Lehman Brothers, but both made it clear that the Government would not finance the deal, but would assist by encouraging ‘others in the industry to help finance the part that you weren't going to take. It would be just like the LTCM consortium’. 7 Lewis was not going to

in Lehman Brothers