Asian Financial Crisis Research Articles

ICOOP puzzle: localistic practices, internationalism values, and Fair Trade in South Korea’s cooperative movement

ABSTRACT This article illuminates an intellectual puzzle of how South Korean cooperative movements attempt to overcome the dilemma between localistic practices and the value of internationalism. Moving beyond anti-capitalistic debates of building links globally, the cooperative movement brings Fair Trade products from developing countries to consumer cooperatives in South Korea, resulting in a scaling up of community economies globally and forging real international solidarity. Engaging with feminist theories put forward by Gibson-Graham and their collaborators, this article calls upon an expanded feminist politics that challenge the “spatial bounding” of community economies that are often joined with localistic practices. Born as one of the most significant forms of community economies to address the economic precarity of grassroots farmers and workers during the Asian Financial Crisis of 1997, iCOOP was set up as a consumer cooperative federation to support local Korean producers with alternative market linkage. Through Fair Trade movement, iCOOP serves as an interesting case to overcome localistic practices and nurture the value of internationalism. This article develops an expanded feminist politics of community economies to confront the tendency of localistic practices by providing four layers of analysis: value, campaign tactics, new governance structure, and scaling solidarity.

주택매매시장에서의 거품에 관한 실증연구

This study examines the monthly real house price index movements over the period 1986-2023 using the GSADF method to determine whether bubbles existed in the Korean housing market, where they occurred, when they occurred, and how long they lasted by housing type (total, apartment, detached house, and townhouse). We summarise the main findings from our empirical analysis as follows. First, there were multiple bubbles in housing prices across the nationwide, Seoul, and all provincial metropolitan areas. However, there are many differences in how bubbles occurred across regions and types of housing. Second, the post-bubble period lasted much longer in the detached house market than in the apartment and row house markets. Third, many housing market bubbles occurred during periods of abundant liquidity. Fourth, while most bubbles are positive, appearing during periods of rapid house price appreciation, negative bubbles appeared in some areas (Busan, Gwangju, and Ulsan) during the 1998 Asian financial crisis. Fifth, the detached house markets in Busan and Ulsan are found to be bubbling at the end of the sample (December 2023). These results suggest that the GSADF test can not only detect historical bubble periods, but can also detect bubbles in real time, providing early warning of bubbles.

Currency Exposure and The Determinants of Corporate Hedging Practice Among Malaysian Non-Financial Firms

This study involves a two-stage analysis. Firstly, the study examines currency exposure and corporate hedging practice (proxied by foreign currency derivative (FCD)) among Malaysian non-financial firms from 1995-2016. It is found that 35.75% of the sample firms are significantly affected by the exposure. The use of FCD is also found to be significantly effective in managing the level of currency exposure. Secondly, the study further investigates the determinants of the use of FCD by incorporating both firm-specific and macroeconomic factors. The study finds almost all the firm-specific factors (liquidity, price-earning ratio, asset growth, and foreign sales) and macroeconomic factors (current account, trade, and inflation) as significant determinants behind the firms’ decision to use FCD. Interestingly, the use of FCD is also driven by specific financial events. Due to the nature of the crisis period, the effect of FCD use is only significant during the Asian financial crisis rather than the peg period and global financial crisis. The novelty of this study lies in the inclusion of the macroeconomic determinants of the FCD use. Hence, the detailed analyses may guide the decision-making process of FCD use as the analysis tackles the exposure and FCD use issues in several aspects with the inclusion of the economic information content.

Nonlinear effects of financial openness on financial development in ASEAN

This study examines the nonlinear effects of financial openness on financial development in the representative ASEAN member states: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. It reveals that with a low (high) level of financial openness, the assets and liabilities of foreign direct investment increase (decrease) equity market capitalization and the financial development, institution, and market indices. We identify a threshold of financial openness where its positive impact begins to diminish; beyond this point, excessive financial openness may become detrimental to financial development. By reassessing the risks associated with financial openness after the Asian financial crisis, we can understand that the potential toxicity amplified by financial openness may pose threats to financial development.

DYNAMIC LINKAGES BETWEEN ECONOMIC POLICY UNCERTAINTY AND STOCK MARKET INTEGRATION: EMPIRICAL EVIDENCE FROM SAARC REGION

This study attempts to empirically test whether the economic policy uncertainty (EPU) in developed economies affects stock market integration across developed and developing countries. We find that the correlations appear to be time-varying and are being influenced by financial crises. The EPU of the developed economies has a negative impact on their stock market interdependence with Pakistan, but a positive impact on stock market correlations between India and the US, India and the UK, Bangladesh and the EU, Sri Lanka and the EU, and no impact on correlations between India and the EU, Bangladesh, and the US. Additional robustness tests reveal that the global financial crisis (GFC) has a substantial influence on all stock market correlation pairs, apart from any pairs with India, whereas the Asian financial crisis (AFC) only has a significant impact on the Sri Lanka–EU relationship. Finally, the study suggests that the EPU in the US, UK and EU has a great influence on the interdependence of the stock markets between South Asian Association for Regional Cooperation (SAARC) and developed nations.

Dynamic connectedness of inflation around the world: A time-varying approach from G7 and E7 countries

Using advanced econometric techniques of the Time-Varying Parameters Vector Autoregression model with stochastic volatility (TVP-SV-VAR) and the Quantile Vector Autoregression (QVAR) model, this research investigates the dynamics of the Consumer Price Index (CPI) across G7 and E7 countries from January 1993 to January 2023, aiming to comprehensively analyze the international transmission of inflation. The study yields several key findings. Firstly, we ascertain that approximately 64% of inflation volatility can be attributed to international transmission. Secondly, our analysis consistently identifies Turkey and Russia as net exporters of inflation over the study period, while G7 countries and Mexico emerge as persistent net importers. Thirdly, we note a gradual increase in China's inflation connectivity with developing countries following the Asian financial crisis, coupled with a diminishing impact of Chinese inflation transmission to developed nations. Fourthly, we observe a heightened complexity in the inflation transmission network during periods marked by high Total Connectivity Index (TCI) values, compared to those with low TCI values. Lastly, our study underscores that the transmission of international inflation intensifies during periods characterized by extremely high or low international inflation rates.

Examining the Effectiveness of Monetary Policy in Asia4: The Pre- and Post-1997 Asian Financial Crisis

Examining the Effectiveness of Monetary Policy in Asia4: The Pre- and Post-1997 Asian Financial Crisis

The Role of Financial Development in Economic Growth using WPM Method

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Economic Crises in Recent World History: Analysis of Causes and Assessment of Consequences

The study «Economic Crises in History: Analysis and Consequences» provides a comprehensive overview of significant economic crises spanning different periods and regions of world history. The work extensively examines the following events: the Great Depression (1929–1933), the Asian Financial Crisis (1997), the Financial Crisis of 2008, the Eurozone Debt Crisis (2010–2012), the Crisis in Russia (1998), and the Oil Crisis of the 1970s.Each crisis is analyzed in terms of its causes, characteristics, impact on the economy and society, as well as measures taken to overcome its consequences. The study emphasizes the role of crises in correcting imbalances, stimulating innovations, and restructuring industries. Specific figures, such as unemployment rates, GDP contractions, changes in financial markets, and other economic indicators, are discussed within the context of each crisis.In the conclusion of the study, it is underscored that despite their complexity and negative consequences, crises can serve as catalysts for change, fostering structural reforms, improving efficiency, and contributing to the development of a resilient economy in the long term.

Does an economic crisis deflate education bubble and inequality? Lessons from South Korea 1997–2020

Rapid education expansion has been a main driver of the remarkable economic growth in South Korea for last decades. However, in recent times, its excessive education credentialism is considered a hurdle against further developments. This study examined whether education bubble and inequality decreased during the Asian Financial Crisis 1997–98, the Global Financial Crisis 2008–09, and the COVID‐19 pandemic 2020. It tracked quarterly distributional changes in private education expenditure of Korean households with Changes‐in‐Changes. The findings indicate that Korean households postponed private education expenditure cut in the first quarter of the crises to prevent their children from falling behind in severe education competition. Then, they temporarily downsized it in the second quarter. During the pandemic, vulnerable students experienced higher fluctuations in private education expenditure than they did in previous crises closely related to disproportionate effects of the pandemic on household income and consumption expenditure. Therefore, this study suggests more expansionary measures for disadvantaged students to recover from a learning loss and improving the public education system as a fundamental measure to mitigate severe private education dependency.

The asymmetric impact of oil market shocks on the time-varying connectedness and spillover of financial stress

ABSTRACT Applying a novel time-varying parameter VAR (TVP-VAR) extended joint connectedness approach this study first examines the connectedness and spillover of financial stress among twelve large Asian economies. The finding shows that the usually high connectedness of the financial stress among these economies was further elevated during the Asian financial crisis and global financial crisis but not significantly during COVID-19 pandemic. The direction of spillover depends on the level of economic development. Developed economies such as South Korea, Singapore and Hong Kong are significantly net transmitters of financial stress to other Asian economies whereas countries such as Pakistan and Indonesia are significantly net receivers. Applying linear and non-linear Markov-switching models this study further examines the impact of oil-supply, and consumption- and speculation-led oil-demand shocks on the dynamic connectedness of financial stress indexes. In the linear model only a speculation-led increase in demand for oil increases the connectedness. However, the Markov-switching model reveals that in the high-volatility regime all types of oil shocks influence the connectedness of the financial stress among these economies. This emphasizes the elevated role of oil market in transmitting financial stress across economies during the time of economic turmoil.

Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.

The growing trend of interdependence between the international stock markets indicated the amalgamation of risk across borders that plays a significant role in portfolio diversification by selecting different assets from the financial markets and is also helpful for making extensive economic policy for the economies. By applying different methodologies, this study undertakes the volatility analysis of the emerging and OECD economies and analyzes the co-movement pattern between them. Moreover, with that motive, using the wavelet approach, we provide strong evidence of the short and long-run risk transfer over different time domains from Malaysia to its trading partners. Our findings show that during the Asian financial crisis (1997-98), Malaysia had short- and long-term relationships with China, Germany, Japan, Singapore, the UK, and Indonesia due to both high and low-frequency domains. Meanwhile, after the Global financial crisis (2008-09), it is being observed that Malaysia has long-term and short-term synchronization with emerging (China, India, Indonesia), OECD (Germany, France, USA, UK, Japan, Singapore) stock markets but Pakistan has the low level of co-movement with Malaysian stock market during the global financial crisis (2008-09). Moreover, it is being seen that Malaysia has short-term at both high and low-frequency co-movement with all the emerging and OECD economies except Japan, Singapore, and Indonesia during the COVID-19 period (2020-21). Japan, Singapore, and Indonesia have long-term synchronization relationships with the Malaysian stock market at high and low frequencies during COVID-19. While in a leading-lagging relationship, Malaysia's stock market risk has both leading and lagging behavior with its trading partners' stock market risk in the selected period; this behavior changes based on the different trade and investment flow factors. Moreover, DCC-GARCH findings shows that Malaysian market has both short term and long-term synchronization with trading partners except USA. Conspicuously, the integration pattern seems that the cooperation development between stock markets matters rather than the regional proximity in driving the cointegration. The study findings have significant implications for investors, governments, and policymakers around the globe.

A Comparison of the Macroeconomic Systems in China and Thailand under Impossible Triangle Theory

Amidst the 1997 Asian financial crisis, the contrasting experiences of China and Thailand shed light on the pivotal role played by capital controls in economic resilience. This study aims to employ a mixed-method approach, combining qualitative and quantitative methods, as well as comparative analysis, to delve deeper into the dynamics at play. The central argument posited here revolves around China's effective employment of capital controls, which facilitated the preservation of a fixed exchange rate regime and the seamless execution of an expansionary monetary policy. These measures shielded China from the adverse repercussions of the financial crisis. In contrast, Thailand's excessive capital liberalization and unwavering commitment to a fixed exchange rate system stripped the country of its ability to independently manage monetary policy. Consequently, Thailand suffered devastating consequences in the wake of the crisis.

Does foreign currency borrowing make firms vulnerable? Experience of emerging India

The Asian Financial Crisis during the late 1990 s revealed the fault lines of foreign currency loans of corporates. It starkly demonstrated that a combination of semi-pegged exchange rates and unregulated foreign currency borrowing could expose corporates and, subsequently, the entire economy to heightened vulnerability. To mitigate these risks, implementing certain capital account restrictions emerged as a potential remedy. Against this backdrop, this paper investigates the changing contours of vulnerability arising from the rising foreign currency leverage of 818 non-financial corporates in India during 2004–2022. In particular, this paper examines the impact of exchange rate shocks and changes in certain key macroeconomic policy variables on the financial vulnerabilities of these firms. Our findings unequivocally indicate that during exchange rate depreciation, unhedged exposures significantly amplified the vulnerability of Indian firms. While our study centres on India, the overarching conclusions and insights derived from our analysis possess broader ramifications for emerging economies grappling with capital account restrictions. The policy implications of our research underscore the need to proactively strengthen the macroprudential toolkit to address the risks associated with foreign currency borrowing and ensure more robust risk management practices to prevent the buildup of systemic vulnerabilities.

ФИНАНСОВЫЕ КРИЗИСЫ И МЕХАНИЗМЫ ИХ ПРЕДОТВРАЩЕНИЯ

This study is aimed at analyzing financial crises and developing mechanisms for their prevention. The work examines the causes of global financial crises, including systemic risks and market imperfections. Particular attention is paid to historical examples, such as the Great Depression, the Asian financial crisis and the 2008 global crisis, in order to identify common factors and the specific features of each case. Based on the analysis, recommendations are proposed to improve financial stability through regulation, monitoring and innovative financial instruments that help prevent future crises.

Causes of the 1997 Asian Financial Crisis: What Can an Early Warning System Model Tell Us?

Causes of the 1997 Asian Financial Crisis: What Can an Early Warning System Model Tell Us?

Core Inflation Rate for China and the ASEAN-10 Countries: Smoothed Signal for Score-Driven Local Level Plus Scale Models

Abstract We use a score-driven minimum mean-squared error (MSE) signal extraction method and perform inflation smoothing for China and the ASEAN-10 countries. Our focus on China and ASEAN-10 countries is motivated by the significant historical variation in inflation rates, e.g. during the 1997 Asian Financial Crisis, the 2007–2008 Financial Crisis, the COVID-19 Pandemic, and the Russian Invasion of Ukraine. Some advantages of the score-driven signal extraction method are that it uses dynamic mean and volatility filters, it considers stationary or non-stationary mean dynamics, it is computationally fast, it is robust to extreme observations, it uses information-theoretically optimal updating mechanisms for both mean and volatility, it uses closed-form formulas for smoothed signals, and parameters are estimated by using the maximum likelihood (ML) method for which the asymptotic properties of estimates are known. In the empirical application, we present the political and economic conditions for each country and analyze the evolution and determinants of the core inflation rate.

Analysis of Growth Factors of the Four Asian Dragons Following the Asian Financial Crisis

Purpose - This study aims to identify implications from a factor decomposition analysis of the growth structure of four Asian dragons, Korea, Singapore, Hong Kong, and Taiwan, which have re-emerged as key regions in the fourth industrial revolution and the global value chain.
 Design/Methodology/Approach - With the Translog Production Function employed as the analysis model, the Stochastic Frontier Analysis model was used to derive total factor productivity (TFP), which was decomposed into four factors including returns to scale, technological changes, technical efficiency, and others.
 Findings - The results of the analysis conducted over different periods indicate that during periods of high growth, the economy’s scale effect largely contributed to total factor productivity. However, it became evident that the effect of technological changes had become increasingly important after going through the foreign exchange and financial crises.
 Research Implications - The new growth momentum in these four regions suggests a need to invest in human capital, research and development, and other areas to cope with the low-growth era. Although past high-growth was attributed to the returns to scale effect, the economic structures shifted in the direction of enhancing efficiency, and the effect of technological changes became a driving force while going through the crises. These results show a need to focus on technological advancement through active research and development investment to increase total factor productivity.

Trade Policy in Indonesia: Between Ambivalence, Pragmatism and Nationalism

Protectionism in Indonesia has been returning since the mid-2000s following a brief period of deregulation and liberalisation after the Asian financial crisis (AFC). This Survey reviews recent developments in Indonesia’s trade policy. It argues that the current approach to trade appears to vacillate between ambivalence, pragmatism and nationalism. Three cases are used to demonstrate the interplay between these characterisations: ‘downstreaming’ and local content requirement policies, Indonesia’s relationship with the World Trade Organization (WTO) and the proliferation of trade agreements, and the commodity balance sheet approach to trade. The paper argues that increasing trade and integrating further into the global value chains are important to have faster economic growth and one way to facilitate that is by improving logistics infrastructure.

Energy prices volatility, natural resource policy-making and green economic recovery in post COVID-19 era: Evidence from BRICS countries

The connectedness of natural resource volatility and economic growth has been an area of central attention for academicians and researchers before and even after the COVID-19 pandemic. The global as well as the Asian financial crises have negatively impacted the natural resources and economic growth of countries. Literature lacks the impact of crises on natural resources especially in BRICS economies. Hence, the current study examines the agriculture, livestock, crude oil, metal, and, coal-based natural resource commodities in determining the sustainable economic growth of BRICS countries. To achieve the objectives, data from the GSC index (Goldman Sachs Commodity Index) and different World Bank indicators is collected over a period from 2002 to 2022 which also includes the era of Post COVID-19 pandemic. Augmented dicky fuller test is used to explore the stationarity of constructs while ECM (error correction model) and Granger causality test are used to capture the connectedness between the explanatory and dependent variables. The empirical results infer that prices of commodities based on agriculture, livestock, oil, coal, and valuable metals are positively linked with sustainable economic performance in BRICS Countries. The results may be supportive of accelerating economic growth by improving the extraction and consumption of natural resources, livestock, agriculture, precious metals, oil, and coal.