What caused the Asian currency and financial crisis?

Corsetti, Giancarlo; Pesenti, Paolo; Roubini, Nouriel

doi:10.1016/s0922-1425(99)00019-5

Cited by 649 publications

(398 citation statements)

References 32 publications

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“…Foreign commercial banks provided the bulk of the private external credit to these countries-$8 billion out of total new external credit of $76 billion. 5 For a more detailed account of the 1997 Asian financial crisis, see Radelet and Sachs (1998 a,b) and Corsetti et al (1999).…”

Section: Overview Of Asean Economiesmentioning

confidence: 99%

On the sustainability of current account deficits: evidence from four ASEAN countries

Baharumshah

Lau

Fountas

2003

Journal of Asian Economics

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This paper examines the sustainability of the current account imbalance for four ASEAN countries (Indonesia, Malaysia, the Philippines and Thailand) over the 1961-1999 period.To this end, we utilize the intertemporal budget constraint (IBC) model to explain the behavior of the current account in these countries. The analysis is based on various unit root and cointegration procedures including those allowing for a structural break to deal with the major shortcomings of previous studies. The empirical results indicate clearly that for all countries, except Malaysia, current account deficits were not on the long-run steady state in the pre-crisis era. This leads us to conclude that the current accounts of these countries were unsustainable and did not move towards external account equilibrium. Moreover, the persistent current account deficits might serve as a leading indicator of financial crises. In contrast, we find strong comovement between inflows and outflows in Indonesia, the Philippines and Thailand in the period including the post-crisis years, while Malaysia was on an unsustainable path. This is because macroeconomic performance of most of the ASEAN countries has changed dramatically since the onset of the Asian crisis in mid-1997. The evidence suggests that action to prevent large appreciations should have been taken prior to the 1997 crisis. JEL classification: F30, F32

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Section: Overview Of Asean Economiesmentioning

confidence: 99%

On the sustainability of current account deficits: evidence from four ASEAN countries

Baharumshah

Lau

Fountas

2003

Journal of Asian Economics

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“…Finally, according to Brown et al 1998: 'there have been periods when hedge funds have huge positive and negative exposures to Asian currencies, but these bear no relation to current, past or future moves in exchange rates and the global markets can absorb multibillion dollar positions put on by major currency funds without suffering ill effects'. [IMF, 1999 andCorsetti et al, 1999]  In 2000, the world experienced a technology stock crisis, known as the dot-com bubble. The dot-com was a speculative bubble covering roughly the 1997-2000 period during which stock markets in industrialized nations saw their equity value rising rapidly.…”

Section: The Role Of Hedge Funds In Economic Crisesmentioning

confidence: 99%

Hedge Funds Development and their Role in Economic Crises

Palaskas¹,

Stoforos²,

Drakatos³

2013

Annals of the Alexandru Ioan Cuza University - Economics

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“…More recent theoretical studies show that financial liberalization may be associated with crises (see, for example, McKinnon and Pill 1997;Allen and Gale 2000;Bacchetta and van Wincoop 2000[01]; Calvo and Mendoza 2000). Empirically, several studies find links between domestic financial deregulation, boom-bust cycles, and banking and balance of payments crises (Corsetti, Pesenti, and Roubini 1999;Demirgü ç-Kunt and Detragiache 1999;Kaminsky and Reinhart 1999;Tornell and Westermann 2005).…”

Section: Notesmentioning

confidence: 99%

Financial Development: Maturing and Emerging Policy Issues

Torre¹,

Gozzi²,

Schmukler³

2007

The World Bank Research Observer

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In recent decades, financial development policies in emerging market economies have been shaped by a fundamental shift toward market-based financial systems and the lessons from financial crises. Today, there is consensus that financial development depends on financial stability and convergence toward international standards. While the debate on some issues has matured, policy thinking in other areas is changing, fueled by recent experiences. This article analyzes the evolution of policy thinking on financial development and discusses three areas that are important to achieving deeper financial systems: stock market development, small-and medium-size enterprise financing, and defined-contribution pension systems. The main emerging issues in these areas are illustrated using recent experiences in Latin America. The article concludes that there is a need to take a fresh look at the evidence, improve diagnoses, and revisit expectations. JEL codes: F36, G15, G18, G20.Policymakers concerned with financial development in emerging market economies face an increasingly complex and perplexing situation. Despite the many efforts already undertaken to improve the macroeconomic environment and reform the institutions believed to foster financial development, financial markets in most emerging economies remain relatively underdeveloped. The more stable, internationalized, and better regulated financial systems of today do not seem to be contributing to social and economic development as much as expected at the beginning of the reform process. This has left policymakers with no clear guidance on how to move forward on the financial market development process and has brought to the forefront of policymakers' agenda some big emerging issues in critical areas of financial development that have not been adequately addressed in the policy debate. These issues have emerged after other important policy issues have been settled and as experience has started to show

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What caused the Asian currency and financial crisis?

Cited by 649 publications

References 32 publications

On the sustainability of current account deficits: evidence from four ASEAN countries

On the sustainability of current account deficits: evidence from four ASEAN countries

Hedge Funds Development and their Role in Economic Crises

Financial Development: Maturing and Emerging Policy Issues

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