The Asian Financial Crisis

by Hunter, W. Curt; Kaufman, George G.; Krueger, Thomas H.; Federal Reserve Bank of Chicago

• ISBN13: 9780792384724
• ISBN10: 0792384725
• Format: Hardcover
• Copyright: 1999-07-01
• Publisher: Kluwer Academic Pub

Summary

In the late 1990s, Korea, Thailand, Indonesia and Malaysia experienced a series of major financial crises evinced by widespread bank insolvencies and currency depreciations, as well as sharp declines in gross domestic production. This sudden disruption of the Asian economic 'miracle' astounded many observers around the world, raised questions about the stability of the international financial system and caused widespread fear that this financial crisis would spread to other countries. What has been called the Asian crisis followed a prolonged slump in Japan dating from the early 1980s and came after the Mexican currency crisis in the mid-1990s. Thus, the Asian crisis became a major policy concern at the International Monetary Fund as well as among developed countries whose cooperation in dealing with such financial crises is necessary to maintain the stability and efficiency of global financial markets. This book collects the papers and discussions delivered at an October 1998 Conference co-sponsored by the Federal Reserve Bank of Chicago and the International Monetary Fund to examine the causes, implications and possible solutions to the crises. The conference participants included a broad range of academic, industry, and regulatory experts representing more than thirty countries. Topics discussed included the origin of the individual crises; early warning indicators; the role played by the global financial sector in this crisis; how, given an international safety net, potential risks of moral hazard might contribute to further crises; the lessons for the international financial system to be drawn from the Asian crisis; and what the role of the International Monetary Fund might be in future rescue operations. Because the discussions of these topics include a wide diversity of critical views and opinions, the book offers a particularly rich presentation of current and evolving thinking on the causes and preventions of international banking and monetary crises. The book promises to be one of the timeliest as well as one of the most complete treatments of the Asian financial crisis and its implications for future policymaking.

Table of Contents

Acknowledgments	xi
Preface	xiii
PART I OPENING REMARKS
The IMF and the Asian Crisis: A View from the Executive Board	3	(8)
Karin Lissakers
The Asian Financial Crisis	11	(6)
Michael H. Moskow
PART II ORIGINS OF THE ASIAN CRISIS
What Caused the Recent Asian Currency Crises?	17	(10)
Craig Burnside
Martin Eichenbaum
Sergio Rebelo
Origins of the Crisis in Asia	27	(6)
Michael P. Dooley
Thoughts on the Origins of the Asian Crisis: Impulses and Propagation Mechanisms	33	(32)
Reuven Glick
Origins of the Asian Crisis: Discussion	65	(10)
Roberto Chang
PART III CAUSES AND IMPLICATIONS OF THE ASIAN CRISIS---THE ROLE OF THE FINANCIAL SECTOR, DOMESTIC POLICIES, AND CONTAGION
Precarious Credit Equilibria: Reflections on the Asian Financial Crisis	75	(40)
Joseph R. Bisignano
Causes and Implications of the Asian Crisis: An Indonesian View	115	(12)
J. Soedradjad Djiwandono
The Korean Banking Crisis: Picking up the Pieces	127	(8)
William C. Hunter
Asian Currency Crisis	135	(4)
Desmond Lachman
Causes and Implications of the Asian Crisis	139	(6)
Flemming Larsen
The Yen and Boom---Bust Cycle in East Asia	145	(4)
Kazuo Ueda
Causes and Implications of the Asian Crisis: The Role of Financial Sector, Domestic Policies, and Contagion	149	(8)
Chaiyawat Wibulswasdi
PART IV RESPONSE TO THE CRISIS---OVERVIEW AND CASE STUDIES
Asian Crisis: Causes and Remedies	157	(10)
Bijan B. Aghevli
Korea's Financial Sector Reforms	167	(26)
Stijn Claessens
Swati Ghosh
David Scott
Whither Thailand?	193	(8)
Yoshihiro Iwasaki
Comment on ``Asian Crisis: Causes and Remedies''	201	(6)
Richard J. Herring
The East Asian Financial Crisis: A Year Later	207	(4)
Yung Chul Park
Removing Financial Bottlenecks to Labor Productivity in Thailand	211	(30)
Robert Townsend
PART V CONTAINING THE RISKS OF FUTURE CRISIS---STRENGTHENING THE REGULATORY FRAMEWORK
What's Wrong with the IMF? What Would Be Better?	241	(20)
Allan H. Meltzer
Containing the Risks of Future Crises: Strengthening the Regulatory Framework	261	(8)
Tom De Swaan
Banking Fragility, Effectiveness, and Regulation in Less-Developed Countries	269	(22)
George J. Benston
Comments on ``What's Wrong with the IMF'' and ``Containing the Risks''	291	(6)
Anil K. Kashyap
Commentary on ``What's Wrong with the IMF'' and ``Containing the Risks''	297	(8)
Carl-Johan Lindgren
PART VI EARLY WARNING INDICATORS, TRANSPARENCY, AND MARKET RESPONSE
Improving Transparency in Asian Banking Systems	305	(16)
Jerome S. Fons
Early Warning Indicators of Financial Crises	321	(10)
Morris Goldstein
The Asian Crises: A New Breed or Deja Vu?	331	(10)
Graciela L. Kaminsky
The Inevitable Perils of a Precocious Giant	341	(6)
John A. Wing
Banks and the Asian Crisis	347	(4)
Martin Mayer
The Signals Approach to Early Warning of Currency Crisis: Does It Work and Is There a Better Way?	351	(18)
Andrew Berg
Catherine Pattillo
Will Greater Disclosure and Transparency Prevent the Next Banking Crisis?	369	(10)
Eric Rosengren
PART VII MORAL HAZARD AND THE ROLE OF INTERNATIONAL RESCUE PROGRAMS
Moral Hazard Is Avoidable	379	(6)
Charles W. Calomiris
Moral Hazard	385	(4)
Michael Mussa
Moral Hazard and the Role of International Rescue Programs	389	(6)
Pedro Pou
Moral Hazard and the Role of International Rescue Programs	395	(6)
Helmut Schieber
PART VIII THE FUTURE ROLE OF THE INTERNATIONAL MONETARY FUND IN INTERNATIONAL RESCUE OPERATIONS
Bailing in the Private Sector	401	(24)
Barry Eichengreen
Does the IMF Have a Future? What Should It Be?	425	(18)
Robert E. Litan
Comment on ``Bailing in the Private Sector'' and ``Does the IMF Have a Future''	443	(4)
Charles A. E. Goodhart
Less Is More in the New International Financial Architecture	447	(6)
Randall S. Kroszner
Assessing IMF's Crisis Prevention and Management Record	453	(8)
Anna J. Schwartz
PART IX LESSONS FROM THE CRISIS FOR THE INTERNATIONAL FINANCIAL SYSTEM
Lessons for the International Financial System	461	(6)
Manuel Guitian
Lessons from the Crisis	467	(4)
Everardo Elizondo
An Analysis of Financial Crisis: Lessons for the International Financial System	471	(8)
Richard Portes
Lessons from the Asian Crisis	479	(6)
Edwin M. Truman
An Analysis of Financial Crisis	485	(6)
Delano Villanueva
Lessons from the Asian Crisis for the International Financial System	491	(8)
Yukio Yoshimura
PART X SUMMARY
Conference Summary	499	(4)
George G. Kaufman
Conference Program	503	(4)
Contributors	507