Southeast Asian Financial Crisis Research Articles

Research on Monetary Policy Implementation and Industrial Structure Transformation Under COVID-19-Evidence From Eight Economic Zones in Mainland China.

The outbreak of COVID-19 has brought a serious impact on the economies of various countries, monetary policy needs to play a role in stimulating economic recovery when the economy encounters a serious negative impact. Since the recurrent outbreak of COVID-19 has caused great obstacles to the normal economic exchanges between countries, it has become particularly important to build the domestic market and optimize the industrial allocation at this time. This paper focuses on studying the dynamic impact of China's monetary policy implementation on the industrial structure during the pandemic. Based on the data of the eight major economic zones in Mainland China and the dataset containing many of China's macroeconomic variables, a SV-TVP-FAVAR model is established. The manuscript compares the time-varying effects of monetary policy tools on the industries at different stages before and after the epidemic. The study supported some interesting conclusions. (1) Either the quantitative or price-based monetary policy shocks have significant time-varying impacts on the industries in different economic zones. The impacts of monetary policy on the primary, secondary, and tertiary industries in each economic zone are uneven. (2) The developed Northern, Eastern, and Southern coastal economic zones in Mainland China are more sensitive to the changes in monetary policy. (3) COVID-19 has brought a tremendous negative shock on the economy, which has destroyed the original steady-state of the economic system and added more uncertainty to the regulatory effect of monetary policy. Compared with other periods in China's economic history that severely negatively impacted (the Southeast Asian financial crisis and the global economic crisis), industries in most economic zones under the COVID-19 epidemic have been affected by monetary policy for a longer lag time. Therefore, for the implementation of monetary policy, at the moment of COVID-19 epidemic, we should pay more attention to the dual-pillar role of macro-prudential regulation, further improve the process of China's interest rate reform, enrich the monetary toolbox, and implement differentiated monetary policies in line with the economic zone's position, to optimize the regional industrial structure, and promote long-term economic growth.

Global financial crisis and industrial upgrading of emerging economy

With the spread of coronavirus, unprecedented supply and demand disruptions crippled the economy. To a large extent, it predicts the advent of financial crisis. Different from previous literatures which mainly focus on the negative impact of novel coronavirus on the word economy and specific industries, this paper researches on the problem under the context of pandemic what an emerging economy should do to undertake the world industrial transfer thus promoting domestic industrial upgrading and improving its position in global value chain. Dissecting the evolution process of the Southeast Asian financial crisis of 1997-98 and the American subprime crisis of 2008-09, this paper provides the introduction to a special issue concerning the relation between global financial crisis and industrial upgrading of emerging economy. Through historical analysis, summarizing experiences and lessons given by previous financial crises, this paper concludes with some revelations and puts forward recommendations for emerging economies. This research also gives the authorities from emerging economies a precise overview of the current emerging issues, therefore they can implement appropriate policies to respond timely to the current circumstances.

THE INFORMATION CONTENT OF THE MALAYSIAN CORPORATE BOND RATING CHANGES

This paper aims at investigating the impact of corporate bond rating changes on the common stock returns of the Malaysian corporations for the period spanning from January 1993 up to December 2003 inclusive. The market model with two competing specifications is used to measure the normal returns of firms. These are the standard event study methodology and the ARMA-GARCH lag specification of the market model. The initial finding is that both downgrades and upgrades trigger negative market reaction, albeit with some signs of information leakage. However, with some additional forensics we find that while downgrades elicit negative market response, upgrades induced no market reaction whatsoever. Moreover, the negative reaction following upgrades that we have seen at the initial finding was mainly due to the impact of the South East Asian financial crisis of the 1997/98.

Depositor Discipline and Bank Risk-Taking Behavior: Evidence from the South-East Asian Financial Crisis

Depositor Discipline and Bank Risk-Taking Behavior: Evidence from the South-East Asian Financial Crisis

Institutional Balancing and International Relations Theory: Economic Interdependence and Balance of Power Strategies in Southeast Asia

This study integrates elements of neorealist and neoliberal theories with a model of institutional balancing that identifies the conditions under which this form of soft balancing occurs. Institutional balancing, i.e. countering pressures or threats through initiating, utilizing, and dominating multilateral institutions, is a new realist strategy for states to pursue security under anarchy. The interplay between the distribution of capabilities and strong economic interdependence shapes states' decisions on when and how to employ this strategy. Historical examples include: inclusive and exclusive efforts by Third World states and the superpowers to organize voting blocs in the UN during the Cold War; inclusive institutional balancing of ASEAN states to constrain China and ensure US support in the ASEAN Regional Forum (ARF) after the Cold War; exclusive institutional balancing of ASEAN states against the US in the ASEAN Plus Three (APT) summit after the Southeast Asian financial crisis. These examples illustrate the logic of institutional balancing under the conditions of bipolarity, incipient multipolarity, and unipolarity.

The Regional Economy: Looking Forward by Looking Back

The year 2007 was a year of anniversaries for Southeast Asia. The two most significant were the fortieth anniversary of the founding of the Association of Southeast Asian Nations (ASEAN) and, more fretfully, the tenth anniversary of the Asian (not Southeast Asian) financial crisis. What these two anniversaries tell us about the future of Southeast Asia's economy(ies) will serve as the basis for this chapter. The economic issues raised by the Asian financial crisis and, counter intuitively, by the development of ASEAN are both important to understanding where Southeast Asia stands today economically and what are some of the major challenges facing the region and its national economies in 2008 and beyond. Both continue to shape the direction of intra-regional integration, Southeast Asia's place in the larger East Asian economy and finally its place in the global economy. Southeast Asia at the beginning of 2008 is a more integrated and insulated economic region still facing major national barriers to further integration. Southeast Asian economies' relations with the two huge Northeast Asian economies are also in a period of significant change. Some Southeast Asian economies face the threat of being decoupled from China and Japan as East Asian production chains, the basis of modern Southeast Asia's integration into the global economy, are being reordered. Finally, Southeast Asia's position in the global economy is an increasingly uncertain one. Maritime Southeast Asia has lost its halo as the first set of emerging markets to open up to foreign direct investment in export-oriented manufacturing. This means it is harder for Southeast Asian economies to remain attractive to foreign direct investment (FDI), and especially investment that helps push them up the value added ladder and away from cheaper competitors.

The Mechanism of Stock Market Integration: Evidence for the Taiwan and U.S. Stock Markets

This study investigates the sources of the comovement of the Taiwan and U.S. stock market. The empirical evidence shows that both economic fundamentals and equity risk premiums can act as transmission mechanisms of both markets. In the meantime, the financial integration is much stronger than real economic integration. Moreover, the deregulation of foreign investments in Taiwan and the Southeast Asian financial crisis in 1997 did not alter the transmission mechanisms of real economic and equity risk premium factors.

Corporate Governance in Malaysia

This article examines the corporate governance system in Malaysia. A sound corporate governance system should help create an environment conducive to the efficient and sustainable growth in the Malaysian corporate sector. Since the Southeast Asian financial crisis in 1997 – 98 (‘financial crisis’), corporate governance has become a key policy issue confronting many Southeast Asian countries, including Malaysia. This article considers the distinctive problems of corporate governance in Malaysia, despite several steps for reform that have taken place since the financial crisis. There will be a brief discussion on the meaning of corporate governance and an overview of the present status of corporate governance in Malaysia, in particular after the financial crisis.

The Influence of Modernity, Modernisation and Postmodernism on Company Law Reform in Malaysia

This article begins with a definition of the terms modernity, modernisation, and postmodernism. It discusses some of the characteristics prevalent in each stage of evolution and the legal system that exists. It investigates the relationship between these forces of change and the legal system that emerges. A review of the influence of modernity, modernisation and postmodernism in the Asian context is carried out. It acts as a framework that assists a better understanding of the character and operation of the law. It also provides a benchmark against which specific law reform proposals and the direction, that the law takes, can be addressed. The South-East Asian financial crisis has revealed the need to improve the level of transparency, accountability and regulation among companies in the region. The shift towards the postmodernist era is characterised by a number of challenges. Finally, the article considers the effect of these changes on company law legislation and reform in the context of Malaysia.

The changing relationship between CAMEL ratings and bank soundness during the Indonesian banking crisis

During the recent Southeast Asian financial crisis, numerous banks failed quickly and unexpectedly. This study uses a unique data set provided by Bank Indonesia to examine the changing financial soundness of Indonesian banks during this crisis. Bank Indonesia's non-public CAMEL ratings data allow the use of a continuous bank soundness measure rather than ordinal measures. In addition, panel data regression procedures that allow for the identification of the appropriate statistical model are used. We argue the nature of the risks facing the Indonesian banking community calls for the addition of a systemic risk component to the Indonesian ranking system. The empirical results show that during Indonesia's stable economic periods, four of the five traditional CAMEL components provide insights into the financial soundness of Indonesian banks. However, during Indonesia's crisis period, the relationships between financial characteristics and CAMEL ratings deteriorate and only one of the traditional CAMEL components - earnings - objectively discriminates among the ratings. The panel data results indicate systemic economy-wide forces must be explicitly considered by the rating system.

Systematic jump risks in a small open economy: simultaneous equilibrium valuation of options on the market portfolio and the exchange rate

The valuation of stock options and currency options has witnessed an explosion of new development in the past 20 years. These models, set up either in a partial equilibrium or a general equilibrium framework, have certainly enriched our understanding of option valuation in one way or the other. However, the main drawback of these models is that stock options and currency options are analyzed in separate contexts. The co-movement of the stock market and the currency market is absent from the option valuation analysis. Such co-movement is extremely important and is best illustrated by the Southeast Asian financial crisis. To overcome this drawback, this paper uses an equilibrium model to investigate the joint dynamics of the exchange rate and the market portfolio in a small open monetary economy with jump-diffusion money supplies and aggregate dividends. It is shown that the exchange rate and the market portfolio are strongly correlated since both are driven by the same economic fundamentals. Furthermore, options on the exchange rate and the market portfolio are evaluated in the same equilibrium context. The analysis shows that parameters describing the same economic fundamentals have very different effects on currency and stock options

Regional Responses to the Southeast Asian Financial Crisis: A Case of Self-Help or No Help?

The currency-cum-financial crises of the 1990s, particularly that which hit Southeast Asia after the devaluation of the Thai baht on 2 July 1997, are suggestive of the relevance and pervasiveness of contagion or negative spillover effects that are largely regional in scope. As such, one of the mantras since the onset of the Southeast Asian financial crisis has been the need for 'regional solutions to regional problems'. Given that the two focal institutions in Southeast Asia, namely the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC), were perceived as being successful in their past attempts in problem-solving, there were high expectations that such regionalism would be the key in finding solutions to the Southeast Asian financial crisis and mitigating the aftershocks. Accordingly, this paper evaluates the regional responses to the crisis, taking stock of both preventive and curative initiatives of significance. While the focus is on ASEAN and APEC, consistent with the concept of 'loose' or 'non-institutionalised' regionalism in Southeast Asia and the larger Asia-Pacific regions, other ad hoc unilateral or bilateral initiatives of significance by other Asian member countries in APEC are also examined, particularly those by the region's dominant economic power, Japan. Current regional responses have not been very successful. This has led to a shift in the emphasis to unilateral and bilateral arrangements. Japan's contribution has been by far the largest relative to others. The crisis and the responses to it have revealed that unless there is greater institutionalisation, ASEAN countries would continue to look outside the region for assistance to facilitate their recovery.

Women's roundtable discussion on the economic, social and political impacts of the Southeast Asian financial crisis.

This article summarizes the main issues revealed at a women's roundtable discussion on the Economic, Social, and Political Impacts of the Southeast Asian Financial Crisis. The discussion was organized by the Development Alternatives of Women for the New Era (DAWN) and was held during April 12-14, 1998, in Manila, the Philippines. The aim was to explore the effects of the financial crisis and its management by states and multilateral agencies on women's political, economic, cultural, and social status; and to reach regional understanding of new issues for the women's movement in Asia and to identify areas of advocacy. Participants included women scholars and activists from Southeast, East, and South Asia; Africa; the Caribbean; Latin America; and the Pacific. Participants came from a wide variety of backgrounds. Nine issues were emphasized. For example, some predicted the currency devaluation before July 1997. The financial crisis is linked with globalization. The International Monetary Fund (IMF) is the primary institution for addressing the financial crisis. IMF conditions on inflation rates and budget surpluses are recessionary and government budget oriented. The crisis has exposed cronyism and corruption within capitalism. Patriarchal values have reemerged as Asian values. Women have lost jobs and income, while the cost of living continues to increase. Prostitution has become more acceptable as legitimate work. Women's human rights are not legally protected. State ideology assumes domestic and sex roles. Issues in each region are identified. 14 key issues pertain to all regions.

Women’s Roundtable Discussion on the Economic, Social and Political Impacts of the Southeast Asian Financial Crisis

Women’s Roundtable Discussion on the Economic, Social and Political Impacts of the Southeast Asian Financial Crisis

La concurrence, frein et moteur de l'investissement

Competition, as both a brake and an engine of investments OFCE For the past year, the main engine of the european upturn has been the improved exchange rate and liquidity background. European exports are regaining market shares, especially in the case of Germany. The investment plans of European firms are more upbeat, though many larger countries, Germany, France and Italy are lagging. Private consumption growth is still vulnerable to a possible comeback of a cautious stance. Domestic policy-mixes as well as a revival of European coordination bear some responsibility in strengthening the current recovery. Would this responsability be yet fulfilled, a 3 % growth rate could be achieved in 1998 for Europe as a whole. The US growth outlook is consistent with a higher dollar exchange rate, in favour of the European growth (1,9 DM in 1998). American companies ease the growth process through efficient investments raising profits and jobs. During the year 1997 the monetary policy kept supporting growth. A moderate tightening is foreseeable before the end of 1997. The slowdown of growth in 1998 (2,6 % after 3,8 % in 1998) would allow for a better fitting of private behaviours to a credible monetary policy. The Japanese economy has recorded a new drop during the spring of 1997, offsetting the anticipated purchases triggered by the 1st April VAT increase. The monetary easing is, in the short run, unable to balance the effects of the restrictive fiscal policy. The main support of the activity is the yen's depreciation, as it helped stabilize market shares for one year. The limited outcome of the South East Asian financial crisis would not hinder the positive contribution of foreign trade to the 1998 growth (2,5 % after 0,9 % in 1997). In France, economic growth is taking off slowly, mainly thanks to the contribution of the foreign trade. The destocking, a lack-luster private consumption and the setback of investment have dampened the domestic demand. However, the turning point is over. Growth would reach 2,1% in 1997 and 3,3% in 1998. Once again, foreign trade is the more dynamic component of GDP. Exports benefit at the same time from a strong external demand and from favorable exchange rates. The trade balance surplus would continue to increase leading to a current surplus exceeding 2 % of GDP this year and 3 % next year. The slowing down of GDP growth has hampered the addition of new capacities. Firms postponed their replacement of equipment. They are not financially constrained, but they use their funds for other purposes than capital expenditures. The permanently high real long interest rates have slowed down new indebtedness and reduced the profitability of installed capital. Therefore, they have prevented firms from making new expenditures. But in 1998, firms investment would pick up again. The producer prices in manufacturing industries would stop decreasing. This would allow a downturn of the real interest rates and an increase in investment expenditures, at a modest level regarding the past slowdown. After a mediocre 1996 year, the purchasing power of households would accelerate in 1997 and in 1998. The ratio of tax to income would be stabilised at 23 % in 1997 then would rise by 0.4 % in 1998. Primary income would accelerate, thanks to increased payrolls in 1998 and a revival of activity for self-employed. On the other hand, the social security benefits would remain low. Private consumption would pick up, in line with the disposable income and a revived consumer confidence. The households' debt ratio would remain quite low, so that they would not need to save more to reduce their debt. Prices would stop slowing down at the forecast horizon. The recovery of raw materials prices and of the dollar would bring the fall of producer prices to a halt in the industry. But consumer prices would still grow slowly because of low wage costs. The current improvement of employment would be confirmed by the recovery, especially in the manufacturing industry. Concerning unemployment, prospects have improved. The unemployment rate would slow down from now to year-end and would stabilise during the first half- year period of 1998. A fall of the number of unemployed would happen in 1998. But, this fall would be limited by the inflow of previously discouraged workers. Due to the changing government, the French fiscal policy has been shifted on two points. First, the pace of the deficit reduction has been slowed. The general government deficit would reach 3,1% of GDP in 1997. The law of finance project for 1998 is based on a cyclical increase of revenues and on a GDP growth to help stabilising the general government deficit close to 3% of GDP. Expenditures are stabilised in real terms. The tax cuts planned by Juppé government are canceled.