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Explain whether appropriate policies could have prevented the East Asian crisis.
Member rating: No Rating | Words: | Submitted: Mon Jun 19 2006
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2. Explain whether appropriate policies could have prevented the East Asian crisis. In 1995, a number of economists had begun to wonder whether the countries in East Asia might be vulnerable to a Latin-type crisis. The main objective indicator was the emergence of large current account deficits. Upon closer examination, economists discovered that several countries had developed worrying financial weaknesses: heavy investment in highly speculative real estate ventures, financed by borrowing either from poorly informed foreign sources or by credit from under-regulated domestic financial institutions. And then Thailand gave in to pressure and floated the baht in July 1997. Speculation against the other regional currencies became widespread and thus the Asian crisis was born. Given the warnings issued by the World Bank and the IMF to Thailand and Malaysia of the risks posed by their financial situations and urged corrective action, it remains unclear if appropriate policies could have prevented the...
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