Asian Finanicial Crisis

Asian Finanicial Crisis

  • Submitted By: shah1986
  • Date Submitted: 04/08/2010 5:42 AM
  • Category: Business
  • Words: 2483
  • Page: 10
  • Views: 1


The Asian Financial Crisis

The Asian financial crisis is the previous example of the last economic ‘meltdown’. The current global financial crisis just shows how globalisation plays a huge role within this. Globalisation is “the integration of national economies into the international economy through trade, foreign direct investment (FDI), capital flows, migration and the spread of technology” (Bhagwati, 2000). The global economy is becoming further inter-twined and therefore it is very difficult to stop the effects of an economic crisis. The previous major economic crisis occurred in South-East Asia with the Asian financial crisis.

The beginning of the Asian financial crisis can be traced back to 2nd July 1997, with many believing the starting of the crisis was triggered in Thailand. On this day, the Thai government floated their currency, the Thai Baht, and it also went to the International Monetary Fund (IMF) for ‘technical assistance’. One by one, South-East Asian countries such as Thailand, Indonesia, Korea (South) and Japan saw their economies crash in the wake of heavy foreign investment. An economic boom had made the region an attractive investment proposition for investors for much of the 1990s. From 1990-1997, the private capital flow to developing countries rose more than fivefold – from US $42 billion in 1990 to US $256 billion in 1997. However, in the summer of 1997, the economic climate changed, on 2nd July 1997, the Thai Baht fell around 20% against the US Dollar. This was seen as the trigger for the crisis, as investors grew nervous, which led to disinvestments on the Baht, resulting into domestic production and development stalling. The reason why this was happening was because many corporations depended on foreign investment and when they dried up, the businesses could not meet their debt repayments,...

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