Asian Currency Crisis Research Articles

Contagion and the Asian Currency Crisis

This study attempts to examine relationships among exchange rates in the Asian region using cointegration methods and to isolate country‐specific effects of contagion using an error correction model. Monthly data covering the period from July 1992 to December 1997 are used. Dynamic simulations of exchange rates with and without short‐run effects of exchange rate shocks are performed. The results indicate that stable long‐run relationships exist among exchange rates in the region. Simulation results for some countries indicate that these countries’ exchange rates would have depreciated in the long run even in the absence of the short‐run effects of potential contagion from other countries, while for other countries the opposite is true.

Intertemporal current account balance and the East Asian currency crises

Under the assumption that the balance of the current account must satisfy the expected intertemporal balance, this paper seeks to establish a precondition for the recent currency crises in East Asian countries. Whenever current policy violates the expected intertemporal balance, it is argued that future policy changes (possibly including the exchange rate regime) are anticipated. Using Trehan and Walsh's [1991] result that nonstationarity of the change of assets is evidence of a violation of the expected intertemporal balance, this paper calculates the augmented Dickey-Fuller statistics of the current account prior to the East Asian currency crises. In each of these crises, there is evidence of a persistent violation of intertemporal balance prior to the crisis. There is also evidence of countries being affected by the plight of their neighbors. Their currencies depreciated even though it was not necessary.

China's Currency Control: Features, Mechanisms, and Effects

Five years have passed since China's foreign exchange regime entered the era of current account convertibility in 1994. During the turbulent Asian currency crisis, China's foreign exchange management has met tests and challenges. To fight capital flight and defend the stability of the renminbi, the Chinese monetary authorities tightened foreign exchange controls in 1998. In this context, this paper reviews the evolution of China's foreign exchange management regime and reveals the features of the current regime's functional mechanisms. By critically assessing the successes and failures of the system, the paper examines the nature of foreign exchange policy changes in 1998. The paper concludes that, in the near future, Beijing is likely to consolidate the framework of the current foreign exchange regime by ensuring current account convertibility and keeping its grip over cross-border capital flows.

Constraints on the retreat from a welfare-orientated approach to public health care in Malaysia

Both in its articulation of values and through incremental changes, the Malaysian government has signalled a change in attitude towards the welfare approach which had hitherto characterized public health care policy. This change envisions an end to reliance upon the state for the provision and financing of health services and the fostering of a system of family-based welfare. In the future citizens should finance their own health care through savings, insurance or as part of their terms of employment. While the state will still accept a degree of responsibility for those unable to pay for their health care, it wishes to share this burden with the corporate sector and non-government organizations as part of a national policy of the ‘Caring Society’. In this article the retreat from a commitment to a welfare model of public health care is documented and some of the serious obstacles to such a policy are discussed. It is concluded that the government’s aspirations for reforming the welfare model will need to be tempered by both practical and political considerations. Moreover, the socio-economic consequences of the Asian currency crisis of 1997 are likely to increase the need for government welfare action.

The Asian Currency Crisis, The Imf, And The Role Of Japan

The Asian Currency Crisis, The Imf, And The Role Of Japan

The Asian Currency Crisis And The Australian Economy

The Asian Currency Crisis And The Australian Economy

Executive Values and Decision Making: The Relationship of Culture and Information Flows

The effect of culture on work values has been studied in a number of ways, largely from a western perspective. Studies have predominantly employed questionnaires as the principal agent of data collection. Yet the Confucian work ethic attributes greater emphasis to collectivist values which bear more centrally on personal relationships. This research used discourse analysis in order to try to identify the implicit features of cultural values as they affected the transmission of financial information, a problem highlighted by the Asian currency crisis in 1997/98.The international hotel industry operates in a multicultural environment where very often foreign operators manage locally owned premises. In these circumstances, budgetary planning and control is an important mechanism. A sample of the interactions between 18 hotel general managers and their financial controllers were studied in Hong Kong. Financial controllers are already subject to a number of role conflicts and it was found that these may be exaggerated by culture.Chinese financial controllers seem to distort the outputs of budgetary planning and control processes in recognition of important organizational relationships. It is suggested that recognizing the direction and effect of these relationships has implications for leadership and performance judgements generally.

Asian Currency and Financial Crises: Lessons from Vulnerability, Crisis and Collapse

This paper presents an analytical framework for understanding the East Asian crises. We argue that vulnerability was created by the boom and bust incurred under pegged exchange rates, and by liberalisation in the presence of a bank-based financial regime with implicit promises of bail-out. These vulnerabilities were interconnected. Negative shocks precipitated both currency devaluation and financial crisis, and the latter created obligations for the government to bail out the financial sector. The criticalfeature which led to collapse was, we argue, the fact that currency depreciation led to a worsening of the financial crisis, due to massive unhedged borrowing in foreign currency, to which the fixed exchange rate regime had led. Financial collapse resulted when the currency devaluation was sufficiently large that those who had lent to the financial system came to believe that government guarantees could not be honoured. This in turn triggered fears of sovereign insolvency, which turned currency depreciation into currency collapse.

FLOATING CURRENCIES, CAPITAL CONTROLS, OR CURRENCY BOARDS: WHAT'S THE BEST REMEDY FOR THE CURRENCY CRISES?

A number of different solutions have been proposed to deal with the Asian currency crisis. One proposal championed by the International Monetary Fund (IMF) is to allow the currencies to float while seeking to maintain their value through tight monetary policy. A second proposal calls for restrictions on capital flows. A third is establishment of currency boards, which seek to stabilize a currency's value by “pegging” it to the value of another currency. In examining each of these three alternatives, this article concludes that none offers a perfect solution. Capital controls are almost always bad, creating serious distortions throughout the economy and destroying investor confidence. Currency boards, as past experience suggests, can be effective in certain circumstances. Nevertheless, there are concerns that currency boards deprive countries of all policy flexibility (some of which could be helpful in coping with crises), are difficult to set up so as to maintain credibility, and may lack adequate reserves to instill confidence. Such concerns have stood in the way of using of currency boards in the cases of Russia and Indonesia. Having expressed reservations about these two “more radical” solutions, this article closes by noting the main problem with the IMF's prescription of floating currencies: its insistence on high interest rates and tight monetary policy. Because high interest rates tend to be ruinous for the local economy—and their effectiveness in limiting currency depreciation in times of crisis is far from clear—the author argues that interest rates should be raised only to compensate for inflation. Consistent with the recent experience of Brazil, the best solution may be just to allow currencies to float with a relatively loose monetary policy.

Book Review: Asia Falling: Making Sense of the Asian Currency Crisis and its Aftermath

Book Review: Asia Falling: Making Sense of the Asian Currency Crisis and its Aftermath

Exchange rate co-ordination for surmounting the East Asian currency crises

Journal of International DevelopmentVolume 11, Issue 1 p. 95-106 POLICY ARENA: Policy Arena Exchange rate co-ordination for surmounting the East Asian currency crises Ronald I. McKinnon, Corresponding Author Ronald I. McKinnon Economics Department, Stanford University, Stanford, California, USAEconomics Department, Stanford University, Stanford, CA 94305, USA.Search for more papers by this author Ronald I. McKinnon, Corresponding Author Ronald I. McKinnon Economics Department, Stanford University, Stanford, California, USAEconomics Department, Stanford University, Stanford, CA 94305, USA.Search for more papers by this author First published: 11 March 1999 https://doi.org/10.1002/(SICI)1099-1328(199901/02)11:1<95::AID-JID578>3.0.CO;2-ZCitations: 3AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume11, Issue1January/February 1999Pages 95-106 RelatedInformation

Exchange‐Rate Coordination for Surmounting the East Asian Currency Crises

This paper investigates the long‐run pattern of private saving in Indonesia, Malaysia, Singapore and Thailand. These countries have not only maintained saving levels that are currently among the highest in the world, but have also experienced a sustained increase in their rate of private saving over the past twenty years. Using a cointegration approach, this paper empirically examines the economic determinants underlying the saving trends in this group and the extent to which these countries share a common experience with respect to the factors accounting for their strong saving performance. The findings suggest that demographic shifts and, to a somewhat lesser extent, rising per capita incomes have been important factors underlying regional saving trends, with broadly similar long‐run impacts across countries. Limited evidence to support a significant and common relation between compulsory and total saving in Singapore and Malaysia is also found.

The Case for Adopting the Convertible Reserves System in Hong Kong

The East Asian currency crisis spread to Hong Kong in October 1997, touching off worldwide repercussions. Weaknesses were revealed in the operational mechanism of Hong Kong's linked exchange rate system (the link). This paper casts the link as a peculiar currency board system in the proper historical and comparative contexts. After examining the conflict between the classical currency board (which relies on the two “automatic” stabilizers of specie‐flow and cash arbitrage) and modern financial developments, it is pointed out that Hong Kong should move forward to the convertible reserves system of Argentina, Estonia and Lithuania (the AEL model), and adopt its cashless/electronic arbitrage arrangement to defend the link. Moreover, it is necessary to balance the need for short‐term stability and the consideration of long‐term flexibility. Any measure that increases the ultimate exit cost from the link must be assessed carefully.

Recent Issues in the Asian Currency Crisis

Since the outbreak of the Asia exchange rate crisis last year, different analysts have attempted to analyze and explain the reason and the development of the crisis theoretically. But the present theory of the reason of the crisis is not account for the crisis, especially the evident feature that the Asia crisis appear to be infective, which seems to make the world economy to a stagnant degree. This thesis filed the present argumentations which helped to understand the Asia foreign exchange rate crisis and made a discussion at this level. This thesis first explained a certain contact between the secular trend of the capital movement and the appearance of the foreign exchange crisis, then extend to the theoretical explanation of the infective effect of the foreign exchange crisis. Meanwhile, as to the question the predictive possibility which is an important part related to foreign exchange theory, this thesis introduced former thesis which took Korea as the object of analysis.

The Asian Economic Crisis and International Business: Implications for Tourism

ABSTRACT This paper reviews the unprecedented events leading to, and surrounding, the East Asian currency, financial, and economic crisis of 1997. It does so in the context of globalization and development trajectories in context with foreign direct investment and the tourism industry. It addresses the imprint of the crisis on Asian development, emphasizes its impact on the region, and elicits implications for the tourism industry in Asia. This paper explores various aspects of the crisis and analyzes the different intensities of impact on regional economic activities. It takes the view that policy-makers require a long-term perspective, it delineates the ensuing challenges, elicits the impact on the tourism industry in the ASEAN region, and concludes by suggesting the areas of the tourism industry worst hit by the crises.

GLOBALIZATION OF CAPITAL MARKETS AND THE ASIAN FINANCIAL CRISIS

This article has three basic aims: (1) to analyze the impact of the opening of their capital markets on the economies of host countries; (2) to investigate the causes of the Asian financial crisis; and (3) to evaluate the likely effects of the South Korean government's recent attempts to restructure its corporate sector.Although the recent Asian financial crisis has led some to question the merits of open capital markets and to call for regulatory restraints on capital flows across international borders, the scientific evidence suggests that the opening of stock markets to foreign investors has been largely beneficial for emerging economies. On average, stock market liberalization has been accompanied by increases in stock prices and reductions in stock return volatility, reductions in inflation, and reductions in the rate of currency depreciation.Much of the blame for the Asian currency crises is assigned to Asian policymakers' futile attempts to defy market forces by trying to maintain their currencies at artificially high levels. But a more fundamental cause of Asia's economic problems has been the widespread value destruction by Asian corporations, which has led to a lower value for the overall economy and weakened the banking sector. The government‐directed banking systems and weak corporate governance structures (including managerial incentives to increase size and market share at the expense of shareholders) that characterize most Asian economies have resulted in systematic overinvestment, bloated payrolls, and sharp declines in corporate profitability.While applauding most of the Korean government's recent measures to reform the economy, the article expresses skepticism about the government‐mandated restructuring of the chaebol known as the “big deal.” Rather than trying to direct the process of restructuring, Korean policymakers should limit their efforts to improving the market mechanism by increasing competition in the markets for capital, corporate control, and goods and services. The Korean market for corporate control transactions could be greatly improved by increasing the efficiency of bankruptcy proceedings and by allowing hostile takeovers by foreign as well as domestic investors. To increase the productivity of capital, Asian companies should seek to realign managerial with shareholder interests by tying compensation to measures of value creation like EVA.

Striving Towards Doi Moi II

In recent times Vietnam has had several very good years. The 1989-95 period, which marked the high point of socio-economic reforms after the launching of doi moi (renovation) in 1986, witnessed average annual growth of 7.8 per cent; the development of a multi-sector (mixed) economy; and a significant opening to international markets. This period also saw Vietnam's political re integration into the world community, marked by normalization of relations with the United States (1994-95), entry into the Association of Southeast Asian Nations (ASEAN) in July 1995, and a growing participation in regional and international organizations. At the same time, it enjoyed an expansion of official aid flows to underpin the country's restructuring and development processes. Can this success be sustained? Although the recent Southeast Asian cur rency crisis has had minimal effect on Vietnam, due to its relatively closed and underdeveloped financial sector, the ensuing regional slowdown is likely to highlight Vietnam's problems of competitiveness and restructuring as it inte grates further into the world economy. Indications of the deceleration of eco nomic reforms first appeared in mid-1994, as the state's capacity for effective absorption and management of increased foreign capital inflows experienced severe strains. Investment inflows continued to increase until mid-1995, but Vietnam's institutional framework remained essentially unchanged, particularly in the financial sector and in project licensing and implementation. This situ ation adversely affected investment conditions, which in turn began to have an impact on the country's macro economy. In early 1995 the leadership initiated a drive to reform both state and party structures ? targeting immediate inad equacies while attempting to modernize and rejuvenate the institutions in a more fundamental manner ? but this quickly stalled. While inter-departmen tal policy co-ordination and execution on issues like trade and foreign affairs have improved somewhat under reform, the impact of doi moi had fully run its course by the end of 1995. Developments in 1997 were largely determined by events in the preceding year. These included: intense debate on, and contending approaches to, the

U.S. economy is as good as it gets

The Asian currency crisis may be wreaking havoc on the economies of Asia's developing countries, but in the U.S.,unemployment is near a 27-year low,and core inflation is at a 31-year low even as wa...

Hedge Funds and the Asian Currency Crisis of 1997

We test the hypothesis that hedge funds were responsible for the crash in the Asian currencies in late 1997. To do so, we develop estimates of the changing positions of the largest ten currency funds in one currency, the Malaysian ringgit and to a basket of Asian currencies. Our methodology is adapted from the Sharpe?s (1992) style analysis approach that decomposes fund returns. We find that the net long or short positions in the ringgit or its correlates did fluctuate dramatically over the last four years. However, these fluctuations were not associated with moves in the exchange rate. The estimated net positions of the major funds were not unusual during the crash period, nor were the profits of the funds during the crisis. In sum, we find no empirical evidence to support the hypothesis that George Soros, or any other hedge fund manager was responsible for the crisis.

The Philippines in 1997: Weathering Political and Economic Turmoil

Research Article| February 01 1998 The Philippines in 1997: Weathering Political and Economic Turmoil Segundo E. Romero Segundo E. Romero Search for other works by this author on: This Site PubMed Google Scholar Asian Survey (1998) 38 (2): 196–202. https://doi.org/10.2307/2645679 Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Twitter LinkedIn Tools Icon Tools Get Permissions Cite Icon Cite Search Site Citation Segundo E. Romero; The Philippines in 1997: Weathering Political and Economic Turmoil. Asian Survey 1 February 1998; 38 (2): 196–202. doi: https://doi.org/10.2307/2645679 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu nav search search input Search input auto suggest search filter All ContentAsian Survey Search This content is only available via PDF. Copyright 1998 The Regents of the University of California Article PDF first page preview Close Modal You do not currently have access to this content.