What Caused the Asian Currency and Financial Crisis?  Part I:  A Macroeconomic Overview

Corsetti, Giancarlo; Pesenti, Paolo; Roubini, Nouriel

doi:10.3386/w6833

Cited by 258 publications

(156 citation statements)

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“…Due to liberalised financial accounts the corporate sectors in numerous East Asian economies (including Hong Kong, Malaysia, South Korea and Thailand) borrowed substantially in foreign currency in the run-up to the crisis, which was attractive because of the high interest spread between domestic and rich country lending rates. This borrowing was also often shortterm (Corsetti, Pesenti, & Roubini, 1998). The foreign capital inflows were channelled into the stock and real estate markets causing prices to rise.…”

Section: Financialisation In Emerging Economies: a Literature Reviewmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

125

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Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bankbased to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.Keywords: Financialisation; Emerging markets; Financial instability; Asset price volatility; Heterodox economics JEL codes: F30; F34; G01; G12; G15; B50 Acknowledgements: We would like to thank our colleague Rex McKenzie for comments on the paper. The usual disclaimers apply.

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Section: Financialisation In Emerging Economies: a Literature Reviewmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

125

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“…Krugman (1998) and Corsetti, Pesenti, and Roubini (1998) argue that the Asian currency and financial crises of 1997 reflected structural and policy problems. Market overreaction and herding only made the inevitable crises deeper.…”

Section: A Theoretical Analysis Of Sovereign Debt Defaultsmentioning

confidence: 99%

Sovereign Debt Defaults and Financing Needs

Messmacher

Kruger²

2004

IMF Working Papers

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“…The equity of the SNB could even become nega-tive. 8 To some extent, the SNB tried to diversify the risk, buying not only EUR denominated assets but also USD denominated assets and, to a smaller extent, even assets denominated in GBP, YEN and other currencies (Figure 2). …”

Section: Figure 2: Development Of Foreign Currency Reservesmentioning

confidence: 99%

“…The third generation model provides unfounded exchange rate expectations as a reason for the currency crisis. Furthermore, it shows how problems in the banking and financial system interact with currency crisis (McKinnon & Pill, 1996), (Corsetti, Pesenti & Roubini, 1999). In this paper, we use a macroeconomic model to highlight some reasons which could lead to a switch from a fixed to a floating exchange rate system in case of a country that is under appreciation pressure.…”

Section: Introductionmentioning

confidence: 99%

Who put the Holes in the Swiss Cheese? Currency Crisis Under Appreciation Pressure

Berthold

Stadtmann

2018

Journal of Central Banking Theory and Practice

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Abstract:We examine the reasons why the SNB gave up the lower floor of the 1.20 CHF/EUR exchange rate arrangement. Three types of shocks played a role: Exogenous shocks to the autonomous component of money demand, interest rate decreases of the ECB, as well as appreciation expectations. In order to defend these shocks, the SNB intervened heavily in the foreign exchange market. This led to an accumulation of reserves in the central bank's balance sheet of the size of 80% of Swiss GDP. Interestingly, the SNB did not lower the interest rate into the negative range during the time period where the peg was in place. Hence, the SNB did not do "whatever it takes" to defend the peg.

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What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview

Cited by 258 publications

References 0 publications

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Sovereign Debt Defaults and Financing Needs

Who put the Holes in the Swiss Cheese? Currency Crisis Under Appreciation Pressure

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