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Crisis, reform and recovery
Shalendra D. Sharma

Young Sam in a televised address warned his fellow-citizens to prepare for an indefinite period of humiliating “bone-carving pain.”10 What went wrong? Competing explanations Why did an economy with such seemingly sound fundamentals succumb so quickly to the economic shock? Two general interpretations have informed the discussion. According to the “fundamentalist” view, the Asian crisis was caused by poor economic fundamentals and policy inconsistencies. Proponents of this view argue that apparently sound macroeconomic indicators masked systemic structural problems

in The Asian financial crisis
Open Access (free)
Issues, debates and an overview of the crisis
Shalendra D. Sharma

times competing perspectives can be roughly divided into three broad categories, viz. those that see the crisis as mainly the result of: (1) investor panic coupled with the intrinsic volatility of international capital markets – which can quickly transform a modest liquidity problem into a full-blown financial crisis; (2) unanticipated exogenous shocks and unfavorable external economic developments; and (3) structural weakness and mismanagement of the domestic economies. Because no single variable is likely to have caused the crisis, the issue is the degree to which

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

The Asian financial crisis 5 The domino that did not fall: why China survived the financial crisis When the financial crisis unexpectedly hit the high-performing East and Southeast Asian economies in mid-1997, it was widely believed that the People’s Republic of China (PRC) would be the next domino to fall. China’s extensive intra-regional trade and investment linkages with the rest of Asia, and the fact that the Chinese economy suffers from many of the same debilitating structural problems that long plagued (and ultimately did incalculable damage) to the

in The Asian financial crisis
Open Access (free)
Stan Metcalfe and Alan Warde

through their role as providers and disseminators of information. Thus, what is available in the market, on what terms, in relation to price, delivery, post-purchase support and rights of redress are the principal items of information that market processes make available. What, then, are the instituted arrangements that underpin this flow of information? Broadly speaking the answer is that this flow of information is provided by market intermediaries who, as it were, form a bridge between the ‘questions’ and the ‘answers’ of buyers and sellers. Traditionally

in Market relations and the competitive process
Open Access (free)
The evolving international financial architecture
Shalendra D. Sharma

to treat obligations to the Fund as senior to other liabilities 289 The Asian financial crisis (Calomiris 2000). Moreover, the Commission recommends that the IMF lend at penalty rates. This recommendation is based on the presumption that if the problem is simply one of liquidity (rather than fundamentals), countries needing assistance for extended periods to service otherwise unviable loans will be precluded from obtaining funds from the IMF. It also means that if the IMF lends at only penalty rates, then a country with major structural flaws will stand to lose by

in The Asian financial crisis
Open Access (free)
Oonagh McDonald

their positions by assigning them to other dealers, which depleted LBHI's cash reserves and therefore those of LBI since they were the main source of LBI's funding. This was the result of Lehman's original dealer counterparty, through novation, transferring its position to another dealer. As a result Lehman lost the associated ‘independent amount’ of collateral. This was not replaced because the initial margins were not posted as dealer-to-dealer trades. 24 The OTC derivatives market was highly concentrated then, as shown by

in Lehman Brothers
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

experienced the most severe economic collapse recorded for any country in a single year since the Great Depression of the 1930s. What happened? Why did Indonesia (and the other high-performing Asian economies) collapse like hollow dominoes? In the numerous post-mortems that have followed, analysts have identified a number of related factors behind the region’s dramatic reversal of fortune. In the case of Indonesia, 123 The Asian financial crisis the variable that soon acquired particular salience was “crony capitalism.” Initially popularized by The Economist (1998), the term

in The Asian financial crisis
Richard R. Nelson

and particularly the labour market, greater protection of the basic living standards of workers and more planning than did the system that had come to be called capitalism. It is apparent that the strong performance after the Second World War of the European and American economies surprised many people, and changed attitudes. Unemployment was low. The economic growth rate was high and the lion’s share of the population experienced rising living standards. It was widely recognised that post-war capitalism was structurally different from that of pre-war days in a

in Market relations and the competitive process
The resurgence of Route 128 in Massachusetts
Michael H. Best

? Certainly the decline of the mini-computer industry and cutbacks in defence expenditures are part of the story, but not, in themselves, an explanation. In this chapter I seek to explain the resurgence of Route 128. It was not widely predicted and the explanation is not obvious. In fact many were so convinced of the terminal decline of New England as a site of industrial production that articles continue to be written on the decline of the region years after its resurgence. Something about the region has given it the resilience to bounce back from ‘structural’ decline

in Market relations and the competitive process
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

Development Fund (FIDF) to prop up failing financial institutions, while neglecting to take actions to remedy the underlying structural problems in the financial and banking sector. The puzzling question is why Thailand’s well-trained and highly professional technocrats made such serious policy errors. Drawing on the Bank of Thailand’s published materials, this chapter suggests that Thailand’s long period of economic boom had lulled the technocrats into complacency. Thinking that the sun would never set on the good times, they threw caution to the winds, becoming prisoners of

in The Asian financial crisis