Comparison Between Asian, Russian and Turkish Financial Crises

Abstract

Since the start of the 1990s, several countries have abandoned fixed-but-adjustable exchange rate regimes. The tendency towards floating exchange rate regimes, or alternatively monetary unions, has given rise to a debate on the disappearance of pure currency crises, and the literature has focused more on general financial crises and large-scale crises of financial systems. The Asian crisis in particular generated much new research that combines currency and banking crises. The currency crisis literature has been criticised on the basis that crisis models are revised or new ones developed after every major crisis episode. Because of crisis-specific features, it is unlikely that a single model would be capable of encompassing the whole character of all crises. The paper discusses the relevance of the new currency and financial crisis theories, ie third generation theories, for the crisis episodes in Asia. It also compares the theories and Asian events to financial crises in Russia and Turkey. The paper shows that the traditional models are still relevant, but to some extent they fall short in explaining the most recent crises of the 1990s, which had features of both currency and financial crises.