The East Asian Financial Crisis was a period of financial crisis that gripped much of Asia beginning in the July of 1997 and raised fears of a worldwide economic meltdown (financial contagion). The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar Financial contagion refers to the phenomenon when one Country 's economy is negatively affected because of changes in the Asset prices of another country's It is also commonly referred to as the East Asian currency crisis or locally as the IMF crisis.

Contents 1 Overview 2 History 3 IMF role 4 Thailand 5 Indonesia 6 South Korea 7 Philippines 8 Hong Kong 9 Malaysia 10 Singapore 11 China 12 United States and Japan 13 Consequences 13.1 Asia 13.2 Outside Asia 14 See also 15 Notes 16 References 16.1 Books 16.2 Papers 16.3 Other 17 External links

Overview

The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj A floating currency is a Currency that uses a Floating exchange rate as its Exchange rate regime. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. External debt (or foreign debt) is that part of the total debt in a country that is owed to Creditors outside the country Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their Creditors Creditors may file a bankruptcy petition against The drastically reduced import earnings that resulted from the forced devaluation then made a quick or even medium-term recovery impossible without necessary international intervention. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and asset prices, and a precipitous rise in private debt. For a topic outline on this subject see List of basic Japan topics. In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash. Consumer debt is Consumer credit which is outstanding In macroeconomic terms it is debt which is used to fund consumption rather than ^[1]

Though there has been general agreement on the existence of a crisis and its consequences, what is less clear were the causes of the crisis, as well as its scope and resolution. Indonesia, South Korea and Thailand were the countries most affected by the crisis. The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj Hong Kong, Malaysia, Laos and the Philippines were also fairly hurt by the slump. Hong Kong ( officially the Hong Kong Special Administrative Region, is a territory located on China 's south coast on the Pearl River Delta, and borders For the biogeographical region see Malesia Malaysia (məˈleɪʒə or /məˈleɪziə/ is a country that consists of thirteen states and Laos (ˈlɑːoʊs or /ˈlaʊs/ officially the Lao People's Democratic Republic, is a Landlocked country in Southeast Asia, bordered by Burma The Philippines ( Filipino: Pilipinas, officially known as the Republic of the Philippines (fil ''Republika ng Pilipinas'' RP Mainland China, India, Taiwan, Singapore and Vietnam were relatively unaffected. Talk People's Republic of China) PEOPLE'S REPUBLIC OF CHINA ARTICLE GUIDELINES India, officially the Republic of India (भारत गणराज्य inc-Latn Bhārat Gaṇarājya; see also other Indian languages) is a country REPUBLIC OF CHINA ARTICLE GUIDELINES Singapore Vietnam (ˌviːɛtˈnɑːm Việt Nam) officially Japan was not much affected by the crisis but was going through its own long-term economic difficulties. For a topic outline on this subject see List of basic Japan topics. However, all of these Asian countries saw their currencies fall significantly relative to the United States dollar, though the harder hit nations saw extended currency losses. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been

Although most of the governments of Asia had no national debt and seemingly sound fiscal policies, the International Monetary Fund (IMF) was forced to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, whose economies were hit particularly hard by the crisis. Government debt (also known as public debt or national debt) is Money (or credit) owed by any level of government either Central government Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. In Japan, which had already been in a state of profound recession due to a highly inefficient banking system laboring under mountains of bad debt (much of which up to that point had been relatively invisible because of the established Japanese banking practice of hiding the losses of major customers), the United States intervened to stop a precipitous slide in the value of the yen by agreeing to buy some $2 billion worth of the Japanese currency. For a topic outline on this subject see List of basic Japan topics. The main elements of Japan's financial system are much the same as those of other major industrialized nations a commercial Banking system which accepted deposits In Accounting and Finance, bad debt is the portion of Receivables that can no longer be collected typically from Accounts receivable or The United States of America —commonly referred to as the In doing so, the United States hoped to increase the value of the yen, which had fallen to its lowest point in some eight years. ^[2]

The efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia, however. The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. After 30 years in power, President Suharto was forced to step down in May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The President of the Republic of Indonesia ( Presiden Republik Indonesia) is the Head of State as well as the Head of the Government of the Republic Suharto, also spelled Soeharto (June 8 1921 &ndash January 27 2008 was an Indonesian military leader and the second President of Indonesia, holding Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) Riots are a form of Civil disorders characterized by disorganized groups lashing out in a sudden and intense rash of Violence, Vandalism or other The rupiah ( sign: Rp; code: IDR) is the official Currency of Indonesia. The effects of the crisis lingered through 1998. Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) In the Philippines growth dropped to virtually zero in 1998. Only Singapore and Taiwan proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover. Year 1999 ( MCMXCIX) was a Common year starting on Friday (link will display full 1999 Gregorian calendar) Economic development Ancient and medieval times Asia was relatively rich in the ancient times ^[3]

History

Until 1997, Asia attracted almost half of the total capital inflow to developing countries. Developing countries are countries that haven't reached Western-style standards of democratic government free market economy industrialization social programs and human rights guaranties The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets See Investor AB for the Swedish investment company An investor is any party that makes an Investment. In Finance, rate of return ( ROR) also known as return on investment ( ROI) rate of profit or sometimes just return, is As a result the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. Money is anything that is generally accepted as Payment for Goods and services and repayment of Debts. In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash. At the same time, the regional economies of Thailand, Malaysia, Indonesia, the Philippines, Singapore, and South Korea experienced high growth rates, 8-12% GDP, in the late 1980s and early 1990s. The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj For the biogeographical region see Malesia Malaysia (məˈleɪʒə or /məˈleɪziə/ is a country that consists of thirteen states and The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. The Philippines ( Filipino: Pilipinas, officially known as the Republic of the Philippines (fil ''Republika ng Pilipinas'' RP Singapore South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː The 1980s was the decade spanning from January 1 1980 to December 31 1989. The 1990s collectively refers to the years between and including 1990 and 1999 This achievement was widely acclaimed by financial institutions including the IMF and World Bank, and was known as part of the "Asian economic miracle". The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The World Bank is an internationally supported Bank that provides financial and technical assistance to developing countries for development programs (e The term Four Asian Tigers or East Asian Tigers refers to the Economies of South Korea, Hong Kong, Singapore

In 1994, noted economist Paul Krugman published an article attacking the idea of an "Asian economic miracle". Paul Robin Krugman ( born February 28 1953 is an American Economist, Columnist, Author, and Intellectual. ^[4] He argued that East Asia's economic growth had historically been the result of capital investment, leading to growth in productivity. Productivity in Economics refers to measures of output from production processes per unit of input However, total factor productivity had increased only marginally or not at all. Total-factor productivity (TFP addresses any effects in total output not caused by inputs or economies of scale Krugman argued that only growth in total factor productivity, and not capital investment, could lead to long-term prosperity. Wealth derives from the old English word "weal" which means "well-being Krugman's views would be seen by many as prescient after the financial crisis had become full-blown, though he himself stated that he had not predicted the crisis nor foreseen its depth.

The causes of the debacle are many and disputed. Thailand's economy developed into a bubble fueled by "hot money". More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia, although Malaysia had better political leadership, and Indonesia, which had the added complication of what was called "crony capitalism". Crony capitalism is a pejorative term describing an allegedly capitalist economy in which success in business depends on close relationships between businessmen and government ^[5] The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only, not particularly the best suited or most efficient, but those closest to the centers of power. ^[6]

At the time of the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors. In Economics, the current account is one of the two primary components of the Balance of payments, the other being the Capital account. A fixed exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a Currency 's value is matched to the value of In the mid-1990s, two factors began to change their economic environment. As the U.S. economy recovered from a recession in the early 1990s, the U.S. Federal Reserve Bank under Alan Greenspan began to raise U. The Economy of the United States is the largest national economy in the world Alan Greenspan (born March 6 1926 in New York City) is an American Economist and was from 1987 to 2006 the Chairman of the Federal Reserve of S. interest rates to head off inflation. This made the U. S. a more attractive investment destination relative to Southeast Asia, which had attracted hot money flows through high short-term interest rates, and raised the value of the U. S. dollar, to which many Southeast Asian nations' currencies were pegged, thus making their exports less competitive. At the same time, Southeast Asia's export growth slowed dramatically in the spring of 1996, deteriorating their current account position.

Some economists have advanced the impact of China on the real economy as a contributing factor to ASEAN nations' export growth slowdown, though these economists maintain the main cause of the crises was excessive real estate speculation. China ( Wade-Giles ( Mandarin) Chung¹kuo² is a cultural region, an ancient Civilization, and depending on perspective a National Economics is the social science that studies the production distribution, and consumption of goods and services. The Association of Southeast Asian Nations, commonly referred to as ASEAN, ˈɑːsiːɑːn AH-see-ahn in English (the Official language Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom Speculation, in a financial context is making an investment that increases the overall risk in a portfolio ^[7] China had begun to compete effectively with other Asian exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Most importantly, the Thai and Indonesian currencies were closely tied to the dollar, which was appreciating in the 1990s. A fixed exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a Currency 's value is matched to the value of Western importers sought cheaper manufacturers and found them, indeed, in China whose currency was depreciated relative to the dollar. Other economists dispute this claim noting that both ASEAN and China experienced simultaneous rapid export growth in the early 1990s. ^[8]

Many economists believe that the Asian crisis was created not by market psychology or technology, but by policies that distorted incentives within the lender-borrower relationship. A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent In Finance, a Borrower is the party in a Loan agreement which receives money or other instrument from a Lender and promises to repay the lender in a specified The resulting large quantities of credit that became available generated a highly-leveraged economic climate, and pushed up asset prices to an unsustainable level. Credit is the provision of resources (such as granting a Loan) by one party to another party where that second party does not reimburse the first party immediately thereby generating In Finance, leverage (or gearing) is using given resources in such a way that the potential positive or negative outcome is magnified and/or enhanced ^[9] These asset prices eventually began to collapse, causing individuals and companies to default on debt obligations. In Finance, default occurs when a debtor has not met its legal obligations according to the debt contract e The resulting panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. A credit crunch is a sudden reduction in the general availability of Loans (or credit) or a sudden increase in the cost of obtaining loans from Banks Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their Creditors Creditors may file a bankruptcy petition against In addition, as investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. The foreign exchange ( currency or forex or FX) market refers to the market for currencies. A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies typically in a Floating exchange rate system In Finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how In order to prevent a collapse of the currency values, these countries' governments were forced to raise domestic interest rates to exceedingly high levels (to help diminish the flight of capital by making lending to that country relatively more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. Capital flight, in Economics, occurs when Assets and/or Money rapidly flow out of a Country, due to an economic event that disturbs Investors A fixed exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a Currency 's value is matched to the value of Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign Currency deposits held by Central banks and monetary Neither of these policy responses could be sustained for long. Very high interest rates, which can be extremely damaging to an economy that is relatively healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts. When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. Floating rate may also refer to a Floating interest rate applied to a Loan or other lending product The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.

Other economists, including Joseph Stiglitz and Jeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets due to the speed of the crisis. Joseph Eugene Stiglitz (born February 9, 1943) is an American Economist and a professor at Columbia University. Jeffrey David Sachs (born November 5, 1954, in Detroit Michigan) is an American Economist and Director of the Earth Institute Economics is the social science that studies the production distribution, and consumption of goods and services. The rapidity with which the crisis happened has prompted Sachs and others to compare it to a classic bank run prompted by a sudden risk shock. A bank run (also known as a run on the bank) occurs when a large number of Bank customers withdraw their deposits because they believe the bank is or might Sachs pointed to strict monetary and contractory fiscal policies implemented by the governments on the advice of the IMF in the wake of the crisis, while Frederic Mishkin points to the role of asymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a relatively small risk in the real economy. Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes Frederic Stanley "Ric" Mishkin (born January 11 1951) is an American Economist and academic at the Columbia Business School In Economics and Contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better Information Herd mentality describes how people are influenced by their peers to adopt certain behaviors follow trends and/or purchase items The crisis had thus attracted interest from behavioral economists interested in market psychology. Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better Another possible cause of the sudden risk shock may also be attributable to the handover of Hong Kong sovereignty on July 1, 1997. The transfer of sovereignty of Hong Kong from the United Kingdom to the People's Republic of China, often referred to as the Handover During the 1990s, hot money flew into the Southeast Asia region but investors were often ignorant of the actual fundamentals or risk profiles of the respective economies. The uncertainty regarding the future of Hong Kong led investors to shrink even further away from Asia, exacerbating economic conditions in the area (subsequently leading to the devaluation of the Thai baht on July 2, 1997). ^[10]

The foreign ministers of the 10 ASEAN countries believed that the well co-ordinated manipulation of currencies was a deliberate attempt to destabilize the ASEAN economies. The Association of Southeast Asian Nations, commonly referred to as ASEAN, ˈɑːsiːɑːn AH-see-ahn in English (the Official language Former Malaysian Prime Minister Mahathir Mohamad accused George Soros of ruining Malaysia's economy with "massive currency speculation", an accusation which few economists took seriously. Tun Dr Mahathir bin Mohamad (ma'ħɑðiɽ bin mʊħɑmmæd̚ (recorded as born on 20 December 1925 was the fourth Prime Minister of George Soros (ˈsɔroʊs or /ˈsɔrəs/ Hungarian ˈʃoroʃ (born August 12, 1930, in Budapest, Hungary, as György Schwartz) is Speculation, in a financial context is making an investment that increases the overall risk in a portfolio (Soros appeared to have had his bets in against the Asian currency devaluations, incurring a loss when the crisis hit. ) At the 30th ASEAN Ministerial Meeting held in Subang Jaya, Malaysia, they issued a joint declaration on 25 July 1997 expressing serious concern and called for further intensification of ASEAN's cooperation to safeguard and promote ASEAN's interest in this regard. Subang Jaya ( Subang = Earrings Jaya = Success is a residential hub in the Klang Valley in Selangor, Malaysia. For the biogeographical region see Malesia Malaysia (məˈleɪʒə or /məˈleɪziə/ is a country that consists of thirteen states and Events 285 - Diocletian appoints Maximian as Caesar, co-ruler Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar ^[11] Coincidentally, on that same day, the central bankers of most of the affected countries were at the EMEAP (Executive Meeting of East Asia Pacific) meeting in Shanghai, and they failed to make the 'New Arrangement to Borrow' operational. Shanghai ( 上[[wikt 海|海]] is the largest city in China in terms of population and one of the largest urban areas in the world with over 20 million A year earlier, the finance ministers of these same countries had attended the 3rd APEC finance ministers meeting in Kyoto, Japan on 17 March 1996, and according to that joint declaration, they had been unable to double the amounts available under the 'General Agreement to Borrow' and the 'Emergency Finance Mechanism'. (IPA /kʲoːto / is a city in the central part of the island of Honshū, Japan. For a topic outline on this subject see List of basic Japan topics. Events 45 BC - In his last victory Julius Caesar defeats the Pompeian forces of Titus Labienus and Pompey the Younger Year 1996 ( MCMXCVI) was a Leap year starting on Monday (link will display full 1996 Gregorian calendar) As such, the crisis could be seen as the failure to adequately build capacity in time to prevent currency manipulation. This hypothesis enjoyed little support among economists, however, who argue that no single investor could have had enough impact on the market to successfully manipulate the currencies' values. In addition, the level of organization necessary to coordinate a massive exodus of investors from Southeast Asian currencies in order to manipulate their values rendered this possibility remote.

IMF role

Such was the scope and the severity of the collapses involved that outside intervention, considered by many as a new kind of colonialism,^[12] became urgently needed. See Colony and Colonization for examples of colonialism which do not refer to Western colonialism Since the countries melting down were among not only the richest in their region, but in the world, and since hundreds of billions of dollars were at stake, any response to the crisis had to be cooperative and international, in this case through the International Monetary Fund (IMF). The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The IMF created a series of bailouts ("rescue") packages for the most affected economies to enable affected nations to avoid default, tying the packages to reforms that were intended to make the restored Asian currency, banking, and financial systems as much like those of the United States and Europe as possible. In Finance, default occurs when a debtor has not met its legal obligations according to the debt contract e In other words, the IMF's support was conditional on a series of drastic economic reforms influenced by neoliberal economic principles called a "structural adjustment package" (SAP). Originally coined by its critics and opponents " neoliberalism " is a label referring to the recent reemergence of Economic liberalism or Classical liberalism Structural adjustment is a term used to describe the policy changes implemented by the International Monetary Fund (IMF and the World Bank (the Bretton The SAPs called on crisis-struck nations to cut back on government spending to reduce deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. Insolvency means the inability to pay one's debts This is defined in two different waysCash flow insolvency unable to pay debts as they fall dueBalance sheet insolvency Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values. In Finance, solvency is the ability of an entity to pay its Debts with available cash Above all, it was stipulated that IMF-funded capital had to be administered rationally in the future, with no favored parties receiving funds by preference. There were to be adequate government controls set up to supervise all financial activities, ones that were to be independent, in theory, of private interest. Insolvent institutions had to be closed, and insolvency itself had to be clearly defined. Insolvency means the inability to pay one's debts This is defined in two different waysCash flow insolvency unable to pay debts as they fall dueBalance sheet insolvency In short, exactly the same kinds of financial institutions found in the United States and Europe had to be created in Asia, as a condition for IMF support. In addition, financial systems had to become "transparent", that is, provide the kind of reliable financial information used in the West to make sound financial decisions. ^[13]

However, the greatest criticism of the IMF's role in the crisis was targeted towards its response. ^[14] As country after country fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. A creditor is a party (eg person organization company or government that has a claim to the services of a second party The dynamics of the situation were closely similar to that of the Latin American debt crisis. The Latin American debt crisis was a Financial crisis that occurred in the early 1980s (and for some countries starting in the 1970s often known as the "lost decade" The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates. A recession is a contraction phase of the Business cycle. The U In Economics Keynesian economics (ˈkeɪnziən also Keynesianism and Keynesian Theory) is based on the ideas of twentieth-century British economist The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic pain. They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001. The federal government of the United States is the central United States Governmental body established by the United States Constitution.

Although such reforms were, in most cases, long needed, the countries most involved had ended up undergoing an almost complete political and financial restructuring. They suffered permanent currency devaluations, massive numbers of bankruptcies, collapses of whole sectors of once-booming economies, real estate busts, high unemployment, and social unrest. Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom Unemployment occurs when a person is available to work and currently seeking work but the person is without work. Rebellion is a refusal of obedienceIt may therefore be seen as encompassing a range of Behaviours from Civil disobedience and mass Nonviolent resistance For most of the countries involved, IMF intervention had been roundly criticized. The role of the International Monetary Fund was so controversial during the crisis, that many locals called the financial crisis the "IMF crisis". The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic ^[15] To begin with, many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows); maintenance of high domestic interest rates in order to suck in portfolio investment and bank capital; and pegging of the national currency to the dollar to reassure foreign investors against currency risk. Risk is a Concept that denotes the precise probability of specific eventualities ^[14] In other words, that the IMF itself was the cause.

Thailand

Further information: Economy of Thailand

From 1985 to 1996, Thailand's economy grew at an average of over 9% per year, the highest economic growth rate of any country at that time. The economy of Thailand is an Emerging economy which is heavily Export -dependent with exports accounting for more than two thirds of The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj In 1996, an American hedge fund had already sold US$400 million of the Thai currency. A hedge fund is a private Investment fund open to a limited range of investors which is permitted by regulators to undertake a wider range of activities than other investment From 1978 until 2 July 1997, the baht was pegged at 25 to the dollar. Events 310 - Pope Miltiades is elected 626 - In fear of assassination Li Shimin ambushes and kills his rival Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar

On 14 May and 15 May 1997, the Thai baht was hit by massive speculative attacks. Events 1264 - Battle of Lewes: Henry III of England is captured in France making Simon de Montfort the Events 1252 - Pope Innocent IV issues the Papal bull Ad exstirpanda, which authorizes but also limits the Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar On 30 June 1996, Prime Minister Chavalit Yongchaiyudh said that he would not devalue the baht. Events 350 - Roman usurper Nepotianus, of the Constantinian dynasty, is defeated and killed by troops of the Usurper Year 1996 ( MCMXCVI) was a Leap year starting on Monday (link will display full 1996 Gregorian calendar) General Chavalit Yongchaiyudh ( Thai ชวลิต ยงใจยุทธ born May 15, 1932) is a Thai politician and general who started Devaluation is a reduction in the value of a Currency with respect to other monetary units This was the spark that ignited the Asian financial crisis as the Thai government failed to defend the baht, which was pegged to the U. The politics of Thailand currently take place in a framework of a Constitutional monarchy, whereby the Prime Minister is the Head of government S. dollar, against international speculators. Thailand's booming economy came to a halt amid massive layoffs in finance, real estate, and construction that resulted in huge numbers of workers returning to their villages in the countryside and 600'000 foreign workers being sent back to their home countries. Layoff is the temporary suspension or permanent Termination of employment of an Employee or (more commonly a group of employees for Business reasons The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom In the fields of Architecture and Civil engineering, construction is a process that consists of the Building or assembling of Infrastructure ^[16] The baht devalued swiftly and lost half of its value. The baht reached its lowest point of 56 units to the US dollar in January 1998. The Thai stock market dropped 75% in 1997. Finance One, the largest Thai finance company until then, collapsed. ^[17]

Thailand's administration eventually floated the local currency, on 2 July 1997. Events 310 - Pope Miltiades is elected 626 - In fear of assassination Li Shimin ambushes and kills his rival Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar On 11 August 1997, the IMF unveiled a rescue package for Thailand with more than $17 billion, subject to conditionalities such as passing laws relating to bankruptcy (reorganizing and restructuring) procedures and establishing strong regulatory frameworks for banks and other financial institutions. Events 2492 BC - Traditional date of the defeat of Bel by Hayk, progenitor and founder of the Armenian nation Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The IMF approved on 20 August 1997, another bailout package of $3. Events 636 - Battle of Yarmouk: Arab forces led by Khalid ibn al-Walid take control of Syria and Palestine Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar 9 billion.

Thai opposition parties claimed that former Prime Minister Thaksin Shinawatra had profited from the devaluation,^[18] although subsequent opposition party-led governments did not investigate the issue. (ทักษิณ ชินวัตร IPA tɕʰinnawát Chinese: 丘[[wikt 達|達]] 新, Qiū Dáxīn nicknamed by the media as แม้ว ^[19]

By 2001, Thailand's economy had recovered. The increasing tax revenue allowed the country to balance its budget and repay its debts to the IMF in 2003, four years ahead of schedule. Tax revenue is the Income that is gained by Governments because of Taxation of the people Even after the military coup d'état the Thai baht continued to appreciate to 36. 5 Baht to the Dollar, to 33 Baht to the Dollar in May 2007 and to 31 Baht to the Dollar in May 2008. The present government is trying to boost the Thai economy to a growth rate of 6% throughout 2008.

Indonesia

Further information: Reformation (Indonesia) and Economy of Indonesia

In June 1997, Indonesia seemed far from crisis. Indonesia has a market-based economy in which the government plays a significant role The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. Unlike Thailand, Indonesia had low inflation, a trade surplus of more than $900 million, huge foreign exchange reserves of more than $20 billion, and a good banking sector. In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of Exports and imports in an But a large number of Indonesian corporations had been borrowing in U. S. dollars. During the preceding years, as the rupiah had strengthened respective to the dollar, this practice had worked well for these corporations; their effective levels of debt and financing costs had decreased as the local currency's value rose. The rupiah ( sign: Rp; code: IDR) is the official Currency of Indonesia.

In July 1997, when Thailand floated the baht, Indonesia's monetary authorities widened the rupiah trading band from 8% to 12%. The currency band is a system of Exchange rates by which a Floating currency is backed by Hard money. The rupiah suddenly came under severe attack in August. On 14 August 1997, the managed floating exchange regime was replaced by a free-floating exchange rate arrangement. Events 1183 - Taira no Munemori and the Taira clan take the young Emperor Antoku and the three sacred treasures Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar The rupiah dropped further. The IMF came forward with a rescue package of $23 billion, but the rupiah was sinking further amid fears over corporate debts, massive selling of rupiah, and strong demand for dollars. The rupiah and the Jakarta Stock Exchange touched a historic low in September. Jakarta Stock Exchange ( JSX) or in Indonesian Bursa Efek Jakarta ( BEJ) is a Stock exchange based in Jakarta, Indonesia Moody's eventually downgraded Indonesia's long-term debt to 'junk bond'. Moody's Corporation ( is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities In Finance, a high yield bond ( non-investment grade bond, speculative grade bond or junk bond) is a bond that is rated below

Although the rupiah crisis began in July and August 1997, it intensified in November when the effects of that summer devaluation showed up on corporate balance sheets. Companies that had borrowed in dollars had to face the higher costs imposed upon them by the rupiah's decline, and many reacted by buying dollars through selling rupiah, undermining the value of the latter further. The inflation of the rupiah and the resulting steep hikes in the prices of food staples led to rioting throughout the country in which more than 500 people died in Jakarta alone. Jakarta Riots of May 1998 were Riots that occurred in several parts of Indonesia, notably Jakarta and Surakarta during May 1998. Jakarta (also DKI Jakarta) is the Capital and largest city of Indonesia. In February 1998, President Suharto sacked the governor of Bank Indonesia, but this had proved insufficient. Suharto, also spelled Soeharto (June 8 1921 &ndash January 27 2008 was an Indonesian military leader and the second President of Indonesia, holding Suharto was forced to resign in mid-1998 and B. J. Habibie became President. Bacharuddin Jusuf Habibie (born June 25, 1936) more commonly known simply as Rudi Habibie or B J Habibie, was the third President of Indonesia Before the crisis, the exchange rate between the rupiah and the dollar was roughly 2000 rupiah to 1 USD. The rupiah ( sign: Rp; code: IDR) is the official Currency of Indonesia. The rate had plunged to over 18000 rupiah to 1 USD at various points during the crisis. Indonesia lost 13. 5% of its GDP that year.

South Korea

Further information: Economy of South Korea

Macroeconomic fundamentals in South Korea were good but the banking sector was burdened with non-performing loans as its large corporations were funding aggressive expansions. The Economy of South Korea is the third-largest in Asia and the 13th-largest in the world by GDP ( PPP) as of South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː A non-performing loan is a Loan that is in default or close to being in default During that time, there was a haste to build great conglomerates to compete on the world stage. Many businesses ultimately failed to ensure returns and profitability. The Korean conglomerates, more or less completely controlled by the government, simply absorbed more and more capital investment. Eventually, excess debt led to major failures and takeovers. For example, in July 1997, South Korea's third-largest car maker, Kia Motors, asked for emergency loans. Kia Motors, a subsidiary of Hyundai Kia Automotive Group, is South Korea 's 2nd largest automobile manufacturer with headquarters in Seoul, In the wake of the Asian market downturn, Moody's lowered the credit rating of South Korea from A1 to A3, on November 28, 1997, and downgraded again to B2 on December 11. Moody's Corporation ( is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities A credit rating assesses the Credit worthiness of an individual Corporation, or even a country For the town in Argentina, see 28 de Noviembre. Events Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar Events 359 - Honoratus, the first known Prefect of the City of Constantinople, takes office That contributed to a further decline in Korean shares since stock markets were already bearish in November. The Seoul stock exchange fell by 4% on 7 November 1997. Korea Exchange (KRX was created through the integration of the three existing Korean spot & futures exchanges ( Korea Stock Exchange, Korea Futures Exchange and KOSDAQ Events 1492 - The Ensisheim Meteorite the oldest Meteorite with a known date of impact strikes the Earth around noon in a Wheat Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar On November 8, it plunged by 7%, its biggest one-day drop to that date. Events 1519 - Hernán Cortés enters Tenochtitlán and Aztec ruler Moctezuma welcomes him with great a Celebration And on November 24, stocks fell a further 7. Events 380 - Theodosius I makes his adventus, or formal 2% on fears that the IMF would demand tough reforms. In 1998, Hyundai Motor took over Kia Motors. The Hyundai Motor Company, a division of the Hyundai Kia Automotive Group, is South Korea ’s largest and the world’s fifth largest automaker in terms of units Samsung Motors' $5 billion dollar venture was dissolved due to the crisis, and eventually Daewoo Motors was sold to the American company General Motors (GM). The Samsung Group ( Korean:, Samsung Guerup) is South Korea 's largest company or Chaebol and the world's largest conglomerate This article is about the Chaebol Daewoo Group For the Korean auto company Daewoo Motors that is associated with Chevrolet, see GM Daewoo. General Motors Corporation ( GM) ( is a multinational automobile manufacturer founded in 1908 and headquartered in the United States.

The Korean won, meanwhile, weakened to more than 1,700 per dollar from around 800. This page provides the history of the currency prior to 1945 For the later South and North Korean currencies see South Korean won and North Korean won. Despite an initial sharp economic slowdown and numerous corporate bankruptcies, Korea has managed to triple its per capita GDP in dollar terms since 1997. Indeed, it resumed its role as the world's fastest-growing economy -- since 1960, per capita GDP has grown from $80 in nominal terms to more than $21,000 as of 2007. However, like the chaebol, South Korea's government did not escape unscathed. Chaebol (alternatively Jaebol, Jaebeol) refers to a South Korean form of business conglomerate. Its national debt-to-GDP ratio more than doubled (app. Government debt (also known as public debt or national debt) is Money (or credit) owed by any level of government either Central government 13% to 30%) as a result of the crisis.

Philippines

Further information: Economy of the Philippines

The Philippine central bank raised interest rates by 1. The economy of the Philippines has a mixed economic system, and one of the newly industrialized emerging market economies of the world The Bangko Sentral ng Pilipinas ( BSP) is the Central bank of the Republic of the Philippines. Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets 75 percentage points in May 1997 and again by 2 points on 19 June. Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar Events 1179 - The Norwegian Battle of Kalvskinnet outside Nidaros. Thailand triggered the crisis on 2 July and on 3 July, the Philippine Central Bank was forced to intervene heavily to defend the peso, raising the overnight rate from 15% to 24%. Events 310 - Pope Miltiades is elected 626 - In fear of assassination Li Shimin ambushes and kills his rival Events 324 - Battle of Adrianople Constantine I defeats Licinius, who flees to Byzantium. The peso ( Filipino: piso) ( sign: ₱; code: PHP) is the currency of the Philippines. The peso fell significantly, from 26 pesos per dollar at the start of the crisis, to 38 pesos in 2000, and to 40 pesos by the end of the crisis.

The Philippine economy recovered from a contraction of 0. 6% in GDP during the worst part of the crisis to GDP growth of some 3% by 2001, despite scandals of the administration of Joseph Estrada in 2001, most notably the "jueteng" scandal, causing the PSE Composite Index, the main index of the Philippine Stock Exchange, to fall to some 1000 points from a high of some 3000 points in 1997. Jose Marcelo Ejercito (born on April 19, 1937) better known as Joseph Ejercito Estrada, or Erap, is a Film actor in the Philippines The PSE Composite Index, commonly known previously as the PHISIX and presently as the PSEi, is the main Stock market index of the Philippine Stock The peso fell even further, trading at levels of about 55 pesos to the US dollar. Later that year, Estrada was on the verge of impeachment but his allies in the senate voted against the proceedings to continue further. This led to popular protests culminating in the "EDSA II Revolution", which finally forced his resignation and elevated Gloria Macapagal-Arroyo to the presidency. The EDSA Revolution of 2001, also called by the local media as EDSA II (pronounced as EDSA Dos or EDSA 2 or the Second People Power Revolution, is the Maria Gloria Macapagal-Arroyo (born Maria Gloria Macaraeg Macapagal on April 5 1947 is a Filipina Politician. Arroyo managed to lessen the crisis in the country, which led to the recovery of the Philippine peso to about 50 pesos by the year's end and is now trading at around 41 pesos to a dollar by end 2007. The stock market also reached an all time high in 2007 and the economy is growing by at least more than 7 percent, its highest in nearly 2 decades.

Hong Kong

Further information: Economy of Hong Kong

The collapse of the Thai baht on July 2, 1997, came only 24 hours after the United Kingdom handed over sovereignty of Hong Kong to the People's Republic of China. Hong Kong's highly favorable geographical position and Entrepot trading opportunities are wealth-generating assets Events 310 - Pope Miltiades is elected 626 - In fear of assassination Li Shimin ambushes and kills his rival Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located The transfer of sovereignty of Hong Kong from the United Kingdom to the People's Republic of China, often referred to as the Handover In October 1997, the Hong Kong dollar, which had been pegged at 7. 8 to the U.S. dollar since 1983, came under speculative pressure because Hong Kong's inflation rate had been significantly higher than the U. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been Hong Kong ( officially the Hong Kong Special Administrative Region, is a territory located on China 's south coast on the Pearl River Delta, and borders S. 's for years. Monetary authorities spent more than US$1 billion to defend the local currency. Since Hong Kong had more than US$80 billion in foreign reserves, which is equivalent to 700% of its M1 money supply and 45% of its M3 money supply, the Hong Kong Monetary Authority (effectively the city's central bank) managed to maintain the peg. In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time

Stock markets became more and more volatile; between 20 October and 23 October the Hang Seng Index dropped 23%. Events 1740 - Maria Theresa takes the throne of Austria. France, Prussia, Bavaria and Saxony Events 4004 BC - Creation of the world begins according to the calculations of Archbishop James Ussher 42 BC - The Hong Kong Monetary Authority then promised to protect the currency. The Hong Kong Monetary Authority ( or HKMA (金管局 is Hong Kong 's Central banking institution (more precisely Currency board) On 15 August 1998, it raised overnight interest rates from 8% to 23%, and at one point to 500%. Events 778 - The Battle of Roncevaux Pass, at which Roland is killed Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets The HKMA had recognized that speculators were taking advantage of the city's unique currency-board system, in which overnight rates automatically increase in proportion to large net sales of the local currency. The rate hike, however, increased downward pressure on the stock market, allowing speculators to profit by short selling shares. In Finance, short selling or "shorting" is the practice of selling a Financial instrument that the seller borrows first (does not own and then The HKMA started buying component shares of the Hang Seng Index in mid-August.

The HKMA and Donald Tsang, then the Financial Secretary, declared war on speculators. Sir Donald Tsang Yam-Kuen, GBM, KBE, JP (born 7 October 1944 is the current Chief Executive and Head of Government of Hong The Government ended up buying approximately HK$120 billion (US$15 billion) worth of shares in various companies,^[20] and became the largest shareholder of some of those companies (e. g. the government owned 10% of HSBC) at the end of August, when hostilities ended with the closing of the August Hang Seng Index futures contract. HSBC Holdings plc ( (,,,) is a Public limited company incorporated in England and Wales, headquartered in London. The Government started selling those shares in 2001, making a profit of about HK$30 billion (US$4 billion).

Malaysia

Further information: Economy of Malaysia

Before the crisis, Malaysia had a large current account deficit of 5% of its GDP. Malaysia is a growing and relatively Open economy. In 2007 the economy of Malaysia was the 29th largest economy in the world by Purchasing power For the biogeographical region see Malesia Malaysia (məˈleɪʒə or /məˈleɪziə/ is a country that consists of thirteen states and In Economics, the current account is one of the two primary components of the Balance of payments, the other being the Capital account. At the time, Malaysia was a popular investment destination, and this was reflected in KLSE activity which was regularly the most active stock exchange in the world (with turnover exceeding even markets with far higher capitalization like the NYSE). Capitalization (or capitalisation &mdash see spelling differences) is writing a word with its first letter as a Majuscule (upper case letter The New York Stock Exchange ( NYSE) is a Stock exchange based in New York City. Expectations at the time were that the growth rate would continue, propelling Malaysia to developed status by 2020, a government policy articulated in Wawasan 2020. The term developed country, or advanced country, is used to categorize countries with developed Economies in which the tertiary and quaternary sectors 2020 ( MMXX) will be a Leap year starting on Wednesday of the Gregorian calendar. Wawasan 2020 or Vision 2020 is a Malaysian Ideal introduced by the former prime minister of Malaysia Mahathir Bin Mohamad during the At the start of 1997, the KLSE Composite index was above 1,200, the ringgit was trading above 2. This article is about index in an economics and finance sense 50 to the dollar, and the overnight rate was below 7%. Overnight is a 2003 documentary by Tony Montana and Mark Brian Smith.

In July 1997, within days of the Thai baht devaluation, the Malaysian ringgit was "attacked" by speculators. Ringgit ( Malay for "jagged" mostly refers to the Malaysian ringgit, which is the local currency in Malaysia, but it can also refer Speculation, in a financial context is making an investment that increases the overall risk in a portfolio The overnight rate jumped from under 8% to over 40%. This led to rating downgrades and a general sell off on the stock and currency markets. By end of 1997, ratings had fallen many notches from investment grade to junk, the KLSE had lost more than 50% from above 1,200 to under 600, and the ringgit had lost 50% of its value, falling from above 2. 50 to under 3. 80 to the dollar.

In 1998, the output of the real economy declined plunging the country into its first recession for many years. A recession is a contraction phase of the Business cycle. The U The construction sector contracted 23. In the fields of Architecture and Civil engineering, construction is a process that consists of the Building or assembling of Infrastructure 5%, manufacturing shrunk 9% and the agriculture sector 5. Manufacturing (from Latin manu factura, "making by hand" is the use of tools and labor to make things for use or sale Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture 9%. Overall, the country's gross domestic product plunged 6. 2% in 1998. During that year, the ringgit plunged below 4. 7 and the KLSE fell below 270 points. In September that year, various defensive measures were announced in order to overcome the crisis. The principal measure taken were to move the ringgit from a free float to a fixed exchange rate regime. A fixed exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a Currency 's value is matched to the value of Bank Negara fixed the ringgit at 3. Bank Negara Malaysia or BNM is the Malaysian Central bank. Its headquarters is located in Kuala Lumpur, the capital of Malaysia and 8 to the dollar. Capital controls were imposed while aid offered from the IMF was refused. Various task force agencies were formed. The Corporate Debt Restructuring Committee dealt with corporate loans. Danaharta discounted and bought bad loans from banks to facilitate orderly asset realization. Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic Danamodal recapitalized banks. Capitalization (or capitalisation &mdash see spelling differences) is writing a word with its first letter as a Majuscule (upper case letter

Growth then settled at a slower but more sustainable pace. The massive current account deficit became a fairly substantial surplus. Banks were better capitalized and NPLs were realised in an orderly way. Small banks were bought out by strong ones. (Unfortunately, this was an excuse for the government-linked banks, which were actually in a weak financial position to force the smaller banks out of the market. Ironically, it was the smaller banks, managed in a sound financial manner, that were dissolved, instead of the larger politically-favored banks. ) A large number of PLCs were unable to regulate their financial affairs and were delisted. Compared to the 1997 current account, by 2005, Malaysia was estimated to have a US$14. 06 billion surplus. ^[21] Asset values however, have not returned to their pre-crisis highs. In 2005 the last of the crisis measures were removed as the ringgit was taken off the fixed exchange system. But unlike the pre-crisis days, it did not appear to be a free float, but a managed float, like the Singapore dollar. The dollar ( sign: $; code: SGD) is the Currency of Singapore.

Singapore

Further information: Economy of Singapore

As the financial crisis spread the economy of Singapore dipped into a short recession. The economy of Singapore is a highly developed capitalist Mixed economy. Financial contagion refers to the phenomenon when one Country 's economy is negatively affected because of changes in the Asset prices of another country's The relatively short duration and milder effect on its economy was credited to the active management by the government. For example, the Monetary Authority of Singapore allowed for a gradual 20% depreciation of the Singapore dollar to cushion and guide the economy to a soft landing. The Monetary Authority of Singapore ( Abbreviation: MAS; Chinese: 新加坡金融管理局 Malay: Penguasa Kewangan Singapura) is The dollar ( sign: $; code: SGD) is the Currency of Singapore. The timing of government programs such as the Interim Upgrading Program and other construction related projects were brought forward. Instead of allowing the labor markets to work, the National Wage Council pre-emptively agreed to Central Provident Fund cuts to lower labor costs, with limited impact on disposable income and local demand. The Central Provident Fund ( Abbreviation: CPF; Chinese: 公积金 Pinyin: Gōngjījīn) is a compulsory comprehensive Social Disposable income is Gross income minus Income tax on that income Unlike in Hong Kong, no attempt was made to directly intervene in the capital markets and the Straits Times Index was allowed to drop 60%. Hong Kong ( officially the Hong Kong Special Administrative Region, is a territory located on China 's south coast on the Pearl River Delta, and borders The capital market is the Market for securities, where companies and Governments can raise longterm funds The Straits Times Index (STI is a market value-weighted Stock market index based on the stocks of 30 representative companies listed on the Singapore Exchange In less than a year, the Singaporean economy fully recovered and continued on its growth trajectory. ^[22]

China

Further information: Economy of the People's Republic of China

The Chinese currency, the renminbi (RMB), had been pegged to the US dollar at a ratio of 8. China has the second-largest economy in the world with a GDP of over $ 6 A fixed exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a Currency 's value is matched to the value of 3 RMB to the dollar, in 1994. Year 1994 ( MCMXCIV) was a Common year starting on Saturday (link will display full 1994 Gregorian calendar) Having largely kept itself above the fray throughout 1997-1998 there was heavy speculation in the Western press that China would soon be forced to devalue its currency to protect the competitiveness of its exports vis-a-vis those of the ASEAN nations, whose exports became cheaper relative to China's. Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) The term Western world, the West or the Occident ( Latin: occidens -sunset -west as distinct from the Orient) can have multiple meanings News is any new information or information on Current events which is presented by print, broadcast, Internet, or Word of mouth Devaluation is a reduction in the value of a Currency with respect to other monetary units Competitiveness is a comparative concept of the ability and performance of a firm sub-sector or country to sell and supply goods and/or services in a given Market The Association of Southeast Asian Nations, commonly referred to as ASEAN, ˈɑːsiːɑːn AH-see-ahn in English (the Official language However, the RMB's non-convertibility protected its value from currency speculators, and the decision was made to maintain the peg of the currency, thereby improving the country's standing within Asia. Convertibility is the quality of paper Money substitutes which entitles the holder to redeem them on demand into money proper Speculation, in a financial context is making an investment that increases the overall risk in a portfolio The currency peg was partly scrapped in July 2005 rising 2. 3% against the dollar, reflecting pressure from the United States.

Unlike investments of many of the Southeast Asian nations, almost all of China's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. Foreign direct investment ( FDI) in its classic definition is defined as a company from one country making a physical investment into building a factory in another country A factory (previously manufactory) or manufacturing plant is an industrial Building where workers manufacture goods A security is a Fungible, Negotiable instrument representing financial value Capital flight, in Economics, occurs when Assets and/or Money rapidly flow out of a Country, due to an economic event that disturbs Investors While China was relatively unaffected by the crisis compared to Southeast Asia and South Korea, GDP growth slowed sharply in 1998 and 1999, calling attention to structural problems within its economy. In particular, the Asian financial crisis convinced the Chinese government of the need to resolve the issues of its enormous financial weaknesses, such as having too many non-performing loans within its primitive and inefficient banking system, and relying heavily on trade with the United States. A non-performing loan is a Loan that is in default or close to being in default A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money

United States and Japan

Further information: Economy of the United States and Economy of Japan

The "Asian flu" had also put pressure on the United States and Japan. The Economy of the United States is the largest national economy in the world The economy of Japan is the second largest economy in the world after the United States, at around US$4 The United States of America —commonly referred to as the For a topic outline on this subject see List of basic Japan topics. Their markets did not collapse, but they were severely hit. On 27 October 1997, the Dow Jones industrial plunged 554 points or 7. Events 312 - Constantine the Great is said to have received his famous Vision of the Cross. Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar The Dow Jones Industrial Average ( also called the DJIA, Dow 30, INDP, or informally the Dow Jones or The Dow) is one of several 2%, amid ongoing worries about the Asian economies. Economic development Ancient and medieval times Asia was relatively rich in the ancient times The New York Stock Exchange briefly suspended trading. The New York Stock Exchange ( NYSE) is a Stock exchange based in New York City. The crisis led to a drop in consumer and spending confidence (see October 27, 1997 mini-crash). The US Consumer Confidence Index (CCI is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending Confidence is generally described as a state of being certain either that a hypothesis or prediction is correct or that a chosen course of action is the best or most effective given the Events 312 - Constantine the Great is said to have received his famous Vision of the Cross. Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar The October 27 1997 mini-crash is the name of a global Stock market crash that was caused by an economic crisis in Asia (a Japan was affected because its economy is prominent in the region. For a topic outline on this subject see List of basic Japan topics. Asian countries usually run a trade deficit with Japan because the latter's economy was more than twice the size of the rest of Asia together as about 40% of Japan's exports go to Asia. The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of Exports and imports in an The Japanese yen fell to 147 as mass selling began, but Japan was the world's largest holder of currency reserves at the time, so it was easily defended, and quickly bounced back. GDP real growth rate slowed dramatically in 1997, from 5% to 1. 6% and even sank into recession in 1998, due to intense competition from cheapened rivals. Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) The Asian financial crisis also led to more bankruptcies in Japan. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their Creditors Creditors may file a bankruptcy petition against In addition, with South Korea's devalued currency, and China's steady gains, many companies complained outright that they could not compete. ^[23]

Another longer-term result was the changing relationship between the U. S. and Japan, with the U. S. no longer openly supporting the highly artificial trade environment and exchange rates that governed economic relations between the two countries for almost five decades after World War II. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including ^[24]

Consequences

Asia

The crisis had significant macro-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries. Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is A stock market, or (equity market is a private or public market for the trading of company Stock and derivatives of company In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash. __NOEDITSECTION__ This is a list of Asian countries and dependencies ^[25] Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 1997-1998. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to The poverty threshold, or poverty line, is the minimum level of Income deemed necessary to achieve an adequate Standard of living in a given country Year 1997 ( MCMXCVII) was a Common year starting on Wednesday (link will display full 1997 Gregorian calendar Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) Indonesia, South Korea and Thailand were the countries most affected by the crisis. The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː The Kingdom of Thailand (ˈtaɪlænd ราชอาณาจักรไทย, râːtɕʰa-ʔaːnaːtɕɑ̀k-tʰɑj

The economic crisis also led to political upheaval, most notably culminating in the resignations of President Suharto in Indonesia and Prime Minister General Chavalit Yongchaiyudh in Thailand. Suharto, also spelled Soeharto (June 8 1921 &ndash January 27 2008 was an Indonesian military leader and the second President of Indonesia, holding General Chavalit Yongchaiyudh ( Thai ชวลิต ยงใจยุทธ born May 15, 1932) is a Thai politician and general who started There was a general rise in anti-Western sentiment, with George Soros and the IMF in particular singled out as targets of criticisms. George Soros (ˈsɔroʊs or /ˈsɔrəs/ Hungarian ˈʃoroʃ (born August 12, 1930, in Budapest, Hungary, as György Schwartz) is The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic Heavy U. S. investment in Thailand ended, replaced by mostly European investment, though Japanese investment was sustained. Islamic and other separatist movements intensified in Southeast Asia as central authorities weakened. For other meanings including people named 'Islam' see Islam (disambiguation. Separatism refers to the advocacy of a state of cultural ethnic tribal religious racial or gender separation from the larger group often with demands for greater political autonomy ^[26]

More long-term consequences included reversal of the relative gains made in the boom years just preceding the crisis. For example, the CIA World Factbook reported that the per capita income (measured by purchasing power parity) in Thailand declined from $8,800 to $8,300 between 1997 and 2005; in Indonesia it declined from $4,600 to $3,700; in Malaysia it declined from $11,100 to $10,400. The World Factbook ( ISSN; also known as the CIA World Factbook) is an annual publication of the Central Intelligence Agency of the Per capita income means how much each individual receives in monetary terms of the yearly income generated in the country The purchasing power parity ( PPP) theory uses the long-term equilibrium Exchange rate of two currencies to equalize their Purchasing power. Over the same period, world per capita income rose from $6,500 to $9,300. ^[27] Indeed, the CIA's analysis asserted that the economy of Indonesia was still smaller in 2005 than it had been in 1997, suggesting an impact on that country similar to that of the Great Depression. near as long as it used to be several months ago It has been actively summarized and split into sub-articles and there is a dynamic talk page discussion of all Indonesia has a market-based economy in which the government plays a significant role Within East Asia, the bulk of investment and a significant amount of economic weight shifted from Japan and ASEAN to China and India. For a topic outline on this subject see List of basic Japan topics. The Association of Southeast Asian Nations, commonly referred to as ASEAN, ˈɑːsiːɑːn AH-see-ahn in English (the Official language China ( Wade-Giles ( Mandarin) Chung¹kuo² is a cultural region, an ancient Civilization, and depending on perspective a National India, officially the Republic of India (भारत गणराज्य inc-Latn Bhārat Gaṇarājya; see also other Indian languages) is a country ^[28]

The crisis has been intensively analyzed by economists for its breadth, speed, and dynamism; it affected dozens of countries, had a direct impact on the livelihood of millions, happened within the course of a mere few months, and at each stage of the crisis leading economists, in particular the international institutions, seemed a step behind. An economist is an expert in the Social science of Economics. Perhaps more interesting to economists was the speed with which it ended, leaving most of the developed economies unharmed. The term developed country, or advanced country, is used to categorize countries with developed Economies in which the tertiary and quaternary sectors These curiosities have prompted an explosion of literature about financial economics and a litany of explanations why the crisis occurred. Financial economics is the branch of Economics concerned with "the allocation and deployment of economic resources both spatially and across time in an uncertain environment" A number of critiques have been leveled against the conduct of the IMF in the crisis, including one by former World Bank economist Joseph Stiglitz. The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The World Bank is an internationally supported Bank that provides financial and technical assistance to developing countries for development programs (e Joseph Eugene Stiglitz (born February 9, 1943) is an American Economist and a professor at Columbia University. Politically there were some benefits. In several countries, particularly South Korea and Indonesia, there was renewed push for improved corporate governance. South Korea, officially the Republic of Korea and often referred to as Korea ( Korean: 대한민국 tɛː The Republic of Indonesia ( (Republik Indonesia is a Country in Southeast Asia. Corporate governance is the set of Processes customs Policies, laws and institutions affecting the way a Corporation is directed administered or controlled Rampaging inflation weakened the authority of the Suharto regime and led to its toppling in 1998, as well as accelerating East Timor's independence. In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time Suharto, also spelled Soeharto (June 8 1921 &ndash January 27 2008 was an Indonesian military leader and the second President of Indonesia, holding East Timor, also known as Timor-Leste (officially the Democratic Republic of Timor-Leste) is a country in Southeast Asia. ^[29]

Outside Asia

After the Asian crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. Developing countries are countries that haven't reached Western-style standards of democratic government free market economy industrialization social programs and human rights guaranties The powerful negative shock also sharply reduced the price of oil, which reached a low of $8 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters. An oil is a substance that is in a viscous Liquid state ( "oily") at ambient temperatures or slightly warmer and is Energy efficiency as it relates to oil usage can be described by the Gross domestic product per Barrel (GDP per barrel (GDP/barrel of oil used Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) The Organization of the Petroleum Exporting Countries ( OPEC) is a Cartel of thirteen countries made up of Algeria, Angola, Ecuador Such sharply reduced oil revenue in turn contributed to the Russian financial crisis in 1998. Year 1998 ( MCMXCVIII) was a Common year starting on Thursday (link will display full 1998 Gregorian calendar) Which in turn caused Long-Term Capital Management in the United States to collapse, after losing $4. Long-Term Capital Management ( LTCM) was a US Hedge fund which failed spectacularly in the late 1990s leading to a massive bailout by other major banks 6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3. Alan Greenspan (born March 6 1926 in New York City) is an American Economist and was from 1987 to 2006 the Chairman of the Federal Reserve of The Federal Reserve Bank of New York is the most important of the twelve Federal Reserve Banks of the United States. 625 billion bail-out. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis). |utc_offset = -2 to -4 |time_zone_DST = BRST |utc_offset_DST = -2 to -5 |cctld For a topic outline on this subject see List of basic Argentina topics. The 1990s collectively refers to the years between and including 1990 and 1999 ^[30]

The crisis in general was part of a global backlash against the Washington Consensus and institutions such as the IMF and World Bank, which simultaneously became unpopular in developed countries following the rise of the anti-globalization movement in 1999. The term Washington Consensus was initially coined in 1989 by John Williamson to describe a set of ten specific economic policy prescriptions that he considered to constitute The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The World Bank is an internationally supported Bank that provides financial and technical assistance to developing countries for development programs (e " Anti-globalization " is a term that encompasses a number of related ideas Year 1999 ( MCMXCIX) was a Common year starting on Friday (link will display full 1999 Gregorian calendar) Four major rounds of world trade talks since the crisis, in Seattle, Doha, Cancún, and Hong Kong, have failed to produce a significant agreement as developing countries have become more assertive, and nations are increasingly turning toward regional or bilateral FTAs (Free Trade Agreements) as an alternative to global institutions. Doha (الدوحة or Ad-Dōḥah) is the Capital city of Qatar. Cancún (pronounced as kanˈkun is a coastal city in Mexico 's easternmost state Quintana Roo, on the Yucatán Peninsula. Hong Kong ( officially the Hong Kong Special Administrative Region, is a territory located on China 's south coast on the Pearl River Delta, and borders Many nations learned from this, and quickly built up foreign exchange reserves as a hedge against attacks, including Japan, China, South Korea. Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign Currency deposits held by Central banks and monetary Pan Asian currency swaps were introduced in the event of another crisis. Pan-Asianism is an ideology that Asian countries and peoples share similar values and similar histories and should be united politically or culturally However, interestingly enough, such nations as Brazil, Russia, and India as well as most of East Asia began copying the Japanese model of weakening their currencies, restructuring their economies so as to create a current account surplus to build large foreign currency reserves. In Economics, the current account is one of the two primary components of the Balance of payments, the other being the Capital account. Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign Currency deposits held by Central banks and monetary This has led to an ever increasing funding for US treasury bonds, allowing or aiding housing (in 2001-2005) and stock asset bubbles (in 1996-2000) to develop in the United States. Treasury securities are Government bonds issued by the United States Department of the Treasury through the Bureau of the Public Debt. Year 2001 ( MMI) was a Common year starting on Monday according to the Gregorian calendar. Year 2005 ( MMV) was a Common year starting on Saturday (link displays full calendar of the Gregorian calendar. Year 1996 ( MCMXCVI) was a Leap year starting on Monday (link will display full 1996 Gregorian calendar) 2000 ( MM) was a Leap year that started on Saturday of the Common Era, in accordance with the Gregorian calendar.

See also

• Financial crisis
• Financial contagion
• List of finance topics

Notes

References

Books

• Kaufman, GG. , Krueger, TH. , Hunter, WC. (1999) The Asian Financial Crisis: Origins, Implications and Solutions. Springer. ISBN 0792384725
• Pettis, Michael (2001). The Volatility Machine: Emerging Economies and the Threat of Financial Collapse. Oxford University Press. ISBN 0-19-514330-2.  
• Blustein, Paul (2001). The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF. PublicAffairs. PublicAffairs (or PublicAffairs Books) is an American book publisher located in New York City. ISBN 1-891620-81-9.  
• Noland, Markus, Li-gang Liu, Sherman Robinson, and Zhi Wang. (1998) Global Economic Effects of the Asian Currency Devaluations. Policy Analyses in International Economics, no. 56. Washington, DC: Institute for International Economics.
• Pempel, T. J. (1999) The Politics of the Asian Economic Crisis. Ithaca, NY: Cornell University Press.
• Ries, Philippe. (2000) The Asian Storm: Asia's Economic Crisis Examined.
• Muchhala, Bhumika, ed. (2007) Ten Years After: Revisiting the Asian Financial Crisis[1]. Washington, DC: Woodrow Wilson International Center for Scholars Asia Program. The Woodrow Wilson International Center for Scholars (or Wilson Center) (located in Washington D

Papers

• Ngian Kee Jin (March 2000). Coping with the Asian Financial Crisis: The Singapore Experience. Institute of Southeast Asian Studies. ISSN 0219-3582
• Tiwari, Rajnish (2003). Post-crisis Exchange Rate Regimes in Southeast Asia, Seminar Paper, University of Hamburg.
• Kilgour, Andrea (1999). The changing economic situation in Vietnam: A product of the Asian crisis?
• S. Radelet, J. D. Sachs, R. N. Cooper, B. P. Bosworth (1998). The East Asian Financial Crisis: Diagnosis, Remedies, Prospects. Brookings Papers on Economic Activity.
• Stiglitz, Joseph (1996). Joseph Eugene Stiglitz (born February 9, 1943) is an American Economist and a professor at Columbia University. Some Lessons From The East Asian Miracle. The World Bank Research Observer.
• Weisbrot, Mark (August 2007). Mark Weisbrot is an American Economist and co-director of the Center for Economic and Policy Research in Washington D Ten Years After: The Lasting Impact of the Asian Financial Crisis. Center for Economic and Policy Research. The Center for Economic and Policy Research (CEPR is a progressive Economic policy Think-tank based in Washington D

Other

• The Crash (transcript only), from the PBS series Frontline

External links

• Congressional Research Service report for US Congress

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