Asian Financial Crisis Research Articles

The effects of foreign direct investment and trade openness on economic growth amid crises in Asian economies

Purpose ― The main objective is to examine the effects of foreign direct investment and trade openness on economic growth (SDG-8.1) about economic growth amid crises in 30 Asian economies. Design/methodology/approach ― The effects of FDI and trade openness on economic growth in the Asian region are examined using the fixed-effects model, panel corrected standard errors (PCSE), and generalized method of moments (GMM) estimations. The study also measures the long-run effects of the estimates and the granger causality tests. Findings ― The findings revealed that both FDI and trade openness contribute to boosting economic growth in Asian economies, and the effect is also persistent in the long run. We also find that the Asian and global financial collapse shocks in 1997-1998 and 2008-2009, respectively, adversely affected the region's economic growth. Additionally, the economic growths of some Asian countries are below the targeted level set in SDG-8.1. Practical implications ― The Asian countries should adopt appropriate policy measures for encouraging the inflow of FDI and cross-border trade of goods and services as it is evident that the inflow of FDI and open trade will improve local human capital and technological capabilities of the industries, which will ultimately help to enhance stable economic growth. Originality/value ― This study is unique in accompanying the Asian financial crisis and world recession in studying the effects of FDI and trade openness on SDG-8.1 in Asian economies.

Price Stability Properties and Volatility Analysis of Precious Metals: An ICSS Algorithm Approach

This paper investigates the price stability properties of precious metals during the 1997 Asian Financial Crisis, 2007–2008 Global Financial Crisis, and 2010 Eurozone Crisis. To analyse the interaction between precious metal prices and the US stock market stock performances, we use the ICSS algorithm along with the GARCH model to evaluate how the number of rapid changes in volatility of precious metals has been reduced. The results suggest gold is the most stable of the precious metals. However, silver, platinum, and palladium showed positive price correlation when the US Dow Jones market was unstable. These results imply that: (1) the correlation among stocks market returns has little to no significant impact on the price movement of precious metals, but the US Dow Jones has some influence on precious metal markets except gold, which means investors can reap this benefit from diversification; (2) investors can systematically increase their portfolio returns by going short with the gold investments with low price co-movement and long on silver, platinum, and palladium with high co-movement with stock prices.

One country, two currencies: The adoption of the Hong Kong currency board, 1983

AbstractCurrency boards have had an enduring attraction as a solution to exchange rate and monetary credibility for small open economies, despite few successful examples. In this context, the case of Hong Kong stands out for its longevity; it survived the handover to China, the Asian financial crises in 1997, and the global crises in 2007–8 and 2020. The 1983 currency crisis and the decision to link the exchange rate to the US$ is usually treated as an outcome of local political uncertainty due to the Sino‐British negotiations which set the framework for how Hong Kong would fit with the rest of China after 1997. We present fresh archival evidence from Hong Kong and London to reveal the year‐long debates over Hong Kong's monetary system after a drop in the exchange rate in September 1982 and to demonstrate how most of the protagonists in Hong Kong and London came only reluctantly to accept the idea of re‐pegging the dollar once public expectations had been raised. We also show how the mixture of currency and banking instability affected the terms of the negotiations in 1982 and 1983 and set the framework for the one country, two currencies system that prevails today.

Contagious convergent cumulative cooperation: the dynamic development of the G20, BRICS and SCO

The institutional development and performance of the Group of 20 (G20), the BRICS group of Brazil, Russia, India, China and South Africa, and the Shanghai Cooperation Organisation (SCO) have shaped twenty-first-century global governance. Each of these plurilateral summit institutions (PSIs) has different founding visions, missions, memberships, participants, institutionalisation patterns and priorities. However, the potential for competition soon gave way to contagious, convergent, cumulative cooperation. By 2021, each was countering COVID-19–created crises in a mutually reinforcing way. Each extended outreach to new members or regular guest leaders, expanded their institutions and civil society engagement, and embraced economic finance, social sustainability and political-security issues. They increased their performance on the major dimensions of global governance in mutually supportive, if highly implicit, ways. The three big non-western Asian powers—China, Russia and India—at the core of these PSIs drove this dynamic, contagious, cumulative convergence and applied lessons learnt across all three PSIs. This was reinforced by their increasing, shared need to guide globalisation and counter its shocks, from the Asian financial crisis in 1997–1999 to the COVID-19 pandemic of 2020–2021.

CENTRAL BANK INDEPENDENCE AND POLICY OUTCOMES: A TRANS-BOUNDARY COMPARISON

This paper examines how Central Bank Independence (CB Independence), using a dataset that compiled by Garriga (2016), can explain the policy outcomes. This dataset was mainly compiled from Cukierman’s work (1995). The dataset identifies statutory reforms affecting CB Independence, their direction, and the attributes necessary with the aim of building on previous literature, the most widely used Cukierman, Webb and Neyapti index. The focus of this paper is empirically estimating causal inferences of inflation and economic growth with an explanatory variable of the central bank Independence measures. It has four components including central bank CEOs, central bank objectives, policy formulations and central bank lending limit policies. The second focus of this paper aims to harness the Asia Financial Crisis 1998-1999, as natural experiment to understand effect of crises by using semi-experimental method Difference-In-Difference (DID). Panel data regression and DID are two empirical research methods applied in this research. This paper proposes all four CB Independence measures can explain the inflation; but this paper does not find statistical support for the economic growth. Supported by DID estimation, this paper also estimates the effect of CB Independence to inflation and economic growth for the sample countries before and after the 1998 Asia financial crisis experienced by sample countries. To enrich our historicalinstitutional narrative, this paper underlines narrative under the tale of two countries – Japan and Indonesia as exemplify.

Survey: The state of sustainable development in Asia and the Pacific

For decades the Asia-Pacific region has been driving global economic growth despite occasional setbacks, such as the collapse of economies in Central Asia immediately following the breakdown of the Soviet Union in 1991 and the 1997–98 Asian financial crisis. Most of the countries in the region have also done well in achieving the Millennium Development Goals (MDGs). In fact, the attainment of the single most critical MDG – halving the global poverty rate – was due to rapid declines in extreme poverty in the region.

IMF Advice on Capital Flows: How Well is it Supported by Empirical Evidence?

AbstractThe 1997–98 Asian financial crisis marked a turning point in the IMF’s previously negative views on the usefulness of capital account restrictions, culminating eventually in the publication of the Fund’s new Institutional View (IV) on the topic in 2012. The IV acknowledged that full capital account liberalization may not always be appropriate, accepted that new restrictions could at times have a useful role to play even in countries that had previously liberalized, and spelled out a specific set of circumstances under which the deploying of new restrictions could be justified as temporary measures in response to large capital flows. This paper documents the important role that empirical research, both by the profession at large as well as by the Fund’s own staff, played in supporting the first two components of the IV. It argues, however, that, empirical support is lacking with respect to the third component of the IV: the conditions under which the deployment of temporary capital account restrictions may be desirable. The conditions stipulated under the IV, which have the effect of considerably restricting the scope of circumstances in which the use of restrictions may be appropriate, are not fully justified by empirical evidence or recent experience and are best understood simply as a vestige of the institution’s pre-IV hostility to the use of restrictions.

A Random-Matrix-Theory-Based Analysis of the Brazilian Stock Market During the 2008 Financial Crisis and Asian Crisis and Temporal Neighborhoods

Several approaches and concepts of physics, such as Random Matrix Theory, have been used to investigate the complexity of financial time series. This study aims to analyze the spectrum of stock correlation in the Brazilian stock market by applying Random Matrix Theory to the subprime and Asian financial crisis periods and their temporal neighborhoods. Results show evident synchronized market behavior during both crises. The results also show that the period preceding a crisis presents symptoms which may predict future crises. Thereby, the methodology presented here could be used by the market as a tool that helps to anticipate possible market fluctuations.

Volatility Spillovers between Stock Market and Hedge Funds: Evidence from Asia Pacific Region

This paper investigates the nature of volatility spillovers between stock returns and hedge funds returns in twelve Asia Pacific countries in the 1997–2018 period. The sample period encompasses sub periods, 1997 Asia financial crisis, 2008 Global financial crisis and 2010 Eurozone crisis; these sub periods were characterised by financial upheavals. We apply the EGARCH methodology to model volatility and volatility spillovers in and between the markets. Our results show that the volatility of stock returns does not affect the volatility of hedge funds returns; however, there are inconsistent evidence of unidirectional volatility spillover from hedge funds to stock market returns.

Korea's trade policy and performance in turbulent times

AbstractThis paper is a complementary study to gain a better understanding of Korea's recent trade performance in the context of the World Trade Organisation's (WTO) 2021 Trade Policy Review (TPR) on Korea. The TPR noted that Korea's external economic activities performed relatively well because Korea was able to limit the negative impact of recent turbulence in the global trade environment through enhanced regional cooperation and integration and reform since the East Asian financial crisis of the late 1990s. In addition, Korea's advanced information and communication technology has helped to mitigate external influences emanating from the global turmoil in the era of digitalisation. Evaluating Korea's recent trade performance, we found export's declining contribution to output growth and increasing vulnerability to external influences. Continuous efforts to widen and deepen regional cooperation together with efforts to rebalance value‐creation activities are required.

Uncertainty measures and inflation dynamics in selected global players: a wavelet approach.

This study investigates the dynamic relationship between economic policy uncertainty (EPU), geopolitical risks (GPR), the interaction of EPU and GPR (EPGR), and inflation in the USA, Canada, the UK, Japan, and China. We employ the continuous wavelet transform (CWT) to track the evolution of model variables and the wavelet coherence (WC) to examine the co-movement and lead-lag status of the series across different frequencies and time. To strengthen the WC, we apply the multiple wavelet coherence (MWC) to determine how good the linear combination of independent variables co-moves with inflation across various time-frequency domains. The CWT reveals heterogeneous characteristics in the evolution of each variable across frequencies. Inflation across samples shows strong variance in the short-term and medium-term while the volatility fizzles out in the long-term. For the explanatory variables, a similar pattern holds for EPU except for Japan and China, where coherence is evident in the short-term. The USA’s and Canada’s GPR reveal strong coherence in the short- and medium-term. Also, the UK and China reflect strong coherence in the short-term but weak significance in the medium-term, while Japan’s GPR reflects only strong coherence in the short-term. The EPGR shows strong variation in the short-and-medium-term in the samples except in China. The WC’s phase-difference reflects bidirectional causalities and switches in signs among series across different scales and periods in the samples, while the MWC reveals the combined intensity, strength, and significance of both EPU and GPR in predicting inflation across frequency bands among the countries. Findings also show significant co-movement among series at date-stamped periods, corroborating critical global events such as the Asian financial crisis, Global financial crisis, and COVID-19 pandemic. The paper has policy implications.

South Korea’s ‘Unfriendly’ corporate governance disclosure to foreign investors

ABSTRACT The Asian Financial Crisis of 1997 initiated an enormous structural change in South Korea’s capital market from its almost unregulated corporate governance regime to a more mandatory regime to accommodate foreign investors’ demand for market transparency and accountability. Corporate governance disclosure is essential for investors to monitor management decisions and exercise their rights on an informed basis. However, South Korea’s current disclosure requirements fall short of providing full, accurate, and timely disclosure in English to foreign investors who comprise approximately 30% of the shares listed on the Korea Exchange. By examining South Korea’s Code of Best Practices for Corporate Governance and the corporate governance disclosure report and comparing this to the recommendations of the ICGN Korea Governance Priorities report of 2022, this paper argues that while efforts to mandate corporate governance disclosure have been ongoing, efforts to make accurate and timely disclosure for the benefit of foreign investors are still lacking. More specifically, current disclosure practices are in danger of repelling foreign investors again post-1997 due to slow translation updates and lack of legal requirement for translation from Korean to English in the first place.

The Politics of Parasite in South Korea

Over the quarter-century since the Asian financial crisis, social inequality has become more visible, and precariousness is now a part of daily life for many in South Korea. Examining patterns of disparity in different areas and the ways in which social discontent with increasing inequality is manifested and politicized will advance our understanding of the politics of social inequality—how perceived inequality leads to political preferences and collective action. This essay describes how different forms of inequality have evolved in South Korea since the late 1990s, what narratives have formed around these issues, and how they have shaped South Korean politics.

The Political Economy of E-Government Innovation and Success in Korea

Over the past two decades, Korea has established and maintained itself as one of the world’s leaders in e-government. This study explains why this has happened by using a political economy analysis. Qualitative case study methods have been utilized to enable sensemaking of Korea’s successful e-government development trajectory. Five complementary factors have been identified to account for this success. They are the legacy of the developmental state in defining government’s role in economic development; the impact of democratization on the nature of e-government services and provision; the shock impact of the Asian Financial Crisis that led to accelerated e-government development; the creation and maintenance of an effective policy process; an effective system of public administration. These factors have provided both the drivers and context for sustained successful e-government development. While the Korean experience supplies lessons for other countries’ e-government development, the whole model is not replicable as it is based on the particularities of Korean development.

WHERE IS THE FUTURE? Geography, Expectation and Experience across Three Decades of Malaysia's Vision 2020

AbstractIn 1991, the Malaysian Prime Minister, Mahathir Mohamad, announced Vision 2020 to make the country ‘fully developed’ by that year. Launched during a period of rapid economic growth, Vision 2020 legitimized Mahathir's developmental penchant for spectacular urban megaprojects and ambitious technological experimentation. While hopes of reaching Vision 2020's crude GDP targets were dashed even before the end of the 1990s (largely as a result of the Asian financial crisis), and Mahathir stepped down from office in 2003, the year 2020 retained significance as a horizon of expectation for a generation of Malaysians. In this Interventions essay I look back at three decades of Vision 2020 from the temporal vantage point of 2020. The lead‐up to that year saw political, popular and artistic retrospection on Vision 2020, spurred in part by nonagenarian Mahathir's return to power. Contextually, ‘Where is the future?’ articulates unrealized technological and developmental expectations from peak Vision 2020. Conceptually, the essay offers a critical geography of political futures past—demonstrating the constitutive spatiality of future expectations and the diverse ways in which elite developmental visions are engaged in life geographies, spaces of experience and representational practices.

Comment on “How Inequality Affects Trust in Institutions: Evidence from Indonesia”

Comment on “How Inequality Affects Trust in Institutions: Evidence from Indonesia”

INVESTMENT DYNAMICS OF SINGAPORE STOCK AND REAL ESTATE MARKETS

This paper examines investment dynamics of six major Singapore asset markets (general stock, property stock, residential, office, retail and industrial) over the last 45 years by focusing on their dynamic correlations, varying spillover-connectedness, Granger causal dependence and selective frequency return connectedness to understand better the changing market relationships among the six markets, as well as the wealth effects between the stock and housing markets. We find that the six asset markets have not become more correlated over time. The 2007–2009 global financial crisis has created the most severe contagion among the markets and was followed by Singapore economic recession. Although these six markets were quite moderately connected in their returns and risk, the return and risk connectedness index measures reached their respective low levels in recent years. The net directional connectedness of the six markets varies in different periods of domestic economic development, external financial crisis and domestic economic recession. Moreover, the housing market leads significant causal interactive roles (linear and nonlinear) over other property and stock markets. On the other hand, the stock market is a strong return transmitter for most of the research periods. The long-term horizon was the most important in contributing to the leadership position in return connectedness of housing market during the Asian financial crisis. Finally, a key message derived from this “long-period” study is that an in-depth understanding of the various investment dynamics is crucial to help maximize mixed portfolio diversification benefits and managing risk in Singapore stock and property markets in the long run.

PENGARUH NET EKSPOR, KURS YUAN, DAN NET FDI TIONGKOK TERHADAP PEREKONOMIAN INDONESIA

Indonesia is one of the developing countries in the world that is experiencing quite good economic growth. However, the Indonesian economy is not always in a stable condition, from 1997 to 2014 Indonesia has experienced two crises, namely the Asian financial crisis (1997-1999) and the global crisis (2007-2008) which was marked by the emergence of disturbances in macroeconomic indicators. The objectives of this study are (1) to analyze the effect of China's Net Exports, Yuan Exchange Rate, and Net FDI simultaneously on the Indonesian Economy and (2) to analyze the effect of China's Net Exports, Yuan Exchange Rate, and Net FDI partially on the Indonesian Economy. This study observes data over a period of nineteen years (2000 to 2018), the data observed is per semester, so that the total amount of data observed is 38 (thirty eight) data. The analysis technique used in this research is multiple linear regression. The results of this study are (1) Net exports, the yuan exchange rate, and China's net FDI simultaneously have a significant effect on the Indonesian economy and (2) partially Net exports do not have a positive and significant effect on the Indonesian economy while the Chinese yuan exchange rate and Net FDI have an effect. positive and significant impact on the Indonesian economy.
 Keywords: Indonesian Economy, Net Exports, Yuan Exchange Rate, China's Net FDI

Information Asymmetry and Card Debt Crisis in Taiwan

Abstract Following the Asian Financial Crisis, South Korea, Hong Kong, and Taiwan experienced card debt crisis in 2001, 2002 and 2005, respectively. Various countries have studied and tried to find the factors that lead to the card debt crisis, hoping that the proposed countermeasures can effectively solve the problem. However, these are only practical operations and observations. Therefore, through information asymmetry, this article constructs a model of card debt crisis from adverse selection and moral hazard, and theoretically provides the government or competent authority with a policy basis. This article employs document analysis, combined with qualitative and quantitative data, to test the research hypotheses. The verification result is supported regardless of hypotheses tests for adverse selection, or moral hazard and confirms that information asymmetry and market failure do exist in the Taiwan credit card market. The policy implication of the article is that the government or competent authority should stop the illusion of free market mechanism and have to be responsible for employing countermeasures to face the crisis. JEL classification numbers: G01,G21,G28. Keywords: Card debt crisis, Information asymmetry, Adverse selection, Moral hazard , Document analysis, Market failure.

The Analysis of Chinese Monetary Policies in Asian Financial Crisis and the COVID-19 Period and the Policy Forecast

In July 1997, the Asian Financial Crisis significantly impacted regional and global economies, particularly in Asia. Similarly, two decades later, the COVID-19 has had a great influence on the Chinese economy as an exogenous element of the demand shock. Bothe the two issues were linked to the contagion effect and asset bubbles. This article discusses the monetary policies used during the two periods and compares and forecasts the monetary strategy based on the current economic status. The Chinese government is suggested to continuously carry out expansionary monetary policy for enterprises and household consumption and helps establish a wider range of digital economy, and helps establish a wider range of digital economy including rural areas.