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.

excellent public services and high individual standards of living. Challenges in the 1970s The 1970s challenged the post-war consensus. There were a number of reasons for this. The post-war economic boom came to an end with growing economic difficulties, especially rising inflation and unemployment. Economic decline became more obvious as mining, shipbuilding, steelmaking, textiles and heavy engineering went into

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Why China survived the financial crisis

for local officials to force bankers to provide loans to favored projects. Predictably, the provincial and local governments’ pursuit of an excessive expansionary monetary policy not only fueled rising inflation (that jumped to some 37 per cent in 1987–88), but also official corruption and graft. Indeed, China’s experience questions the conventional view that decentralization improves efficiency, or that delegation of greater autonomy to local authorities or firm-level management will eradicate the “soft budget constraints.” In fact, official corruption has reached

in The Asian financial crisis

procedures. 63 Such pressures intensified into the 1970s. Industrial unrest, rising inflation, growing unemployment, and confused policy responses brought down the Conservative administration of 1970–74. 64 The incoming Labour government also had to cope with global economic turbulence, and the persistent mistrust of subsequent Labour administrations (1974–79) on the part of international capital markets resulted in a now infamous International Monetary Fund loan in 1976. 65 These political and economic circumstances provided fertile ground for the

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The evolving international financial architecture

its underlying economic value – leaving rising inflation, trade deficits, and eroding export competitiveness in its wake. Finally, as Hausmann, Panizza and Stein (1999) have shown, emerging markets in Latin America that have attempted to allow their exchange rates to float have experienced greater interest-rate volatility than fixed-rate regimes. For this reason, Calvo and Reinhart (2000) argue that floating exchange rates can have destabilizing effects on emerging markets. On the other hand, a fixed exchange-rate regime reduces transaction costs. As was noted earlier, it

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became the first man to resign the office of the presidency and Gerald R. Ford was thus sworn in as the 38th president of the US.46 Facing the new president were a multitude of problems including Nixon’s potential pardon, rising inflation and unemployment, and the continuing problems in Vietnam. Ford’s top priority was hardly, then, the conduct of US–UK relations.47 In spite of this, the new president was soon confronted with something approaching a crisis in US–UK relations, because of differences over the evolving situation in Cyprus. The Cyprus crisis is important

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Issues, debates and an overview of the crisis

: issues, debates and overview 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. In economic terms, 1997 began on a positive note for the longbeleaguered Russian economy. The gradual decline in inflation and successful exchange-rate management were promising signs. Moreover, the stock market was on the rebound, and output actually rose slightly (by 0.8 per cent) for the first time in over a decade. While the budget deficit

in The Asian financial crisis