Home > Asia-Pacific, Economics > The Asian Financial Crisis of 1997 a Decade On: Two Perspectives

The Asian Financial Crisis of 1997 a Decade On: Two Perspectives

Chris Giles and R. Taggart Murphy each write their perspective on the Asian financial crisis of 1997. The full articles are available in Japan Focus. Chris Giles article is entitled, Wrong Lessons Drawn From Asia’s 1997 Financial Crisis: The IMF Revisited; R. Taggart Murphy’s is entitled, Japan, the United States and the Asian Financial Crisis of 1997: reflections a decade On.

An excerpt from Murphy’s:

Chris Giles suggests in his piece that Asian countries may have drawn the “wrong” lessons from Asia’s 1997 Financial Crisis. They were determined never again to find themselves vulnerable either to the sudden capital outflows that precipitated the crisis or the dictates of the IMF that arguably exacerbated it. So countries such as Thailand, South Korea, Indonesia and Malaysia – not to mention China — set about accumulating foreign exchange reserves far in excess of their import and debt service needs. Denominated largely in U.S. dollars, these reserves were acquired via trade surpluses and have fostered eye-popping imbalances: huge U.S. trade deficits that are the flip side of Asia’s lopsided surpluses, export-dependent Asian economies, and a U.S. economy “distorted towards non-tradable services such as real estate” that spends like the proverbial drunken sailor.

The sheer, unprecedented size of these imbalances frightens analysts such as Giles. While he concedes that Asia’s response to the earlier crisis “makes a repeat of the 1997-98 outflows inconceivable”, he frets – like many — that something, somewhere is going to give with all kinds of potentially nasty consequences that we can barely foresee. He laments the state of corporate governance in Asia, but admits that bringing about greater transparency and accountability is “easier said than done.”

Read the complete texts >>

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Categories: Asia-Pacific, Economics
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