1. The Asian Crisis: a Perspective After Ten Years W. Max Corden Presented by Trace Hayles

2. The Asian Crisis: Prelude 1997: Thailand, Indonesia, Malaysia, and Korea in the midst of an investment boom Comprised of local savings and FDI Result of favorable macroeconomic policies 3 Forms of capital inflow that fueled boom FDI Inflow of portfolio capital into local stock markets Short term borrowing by local banks

3. The Bubble Bursts Catalyst: Eventual slowdown of export growth in Thailand (20% to 0% year over year) 1997: Exchange Rate crisis for baht This triggered crises in the other three Asian Tigers (contagion) Free movement of capital policies – not in place in China and India

4. GDP Growth Country1988-9519961997199819992000 Indonesia7.97.84.7-13.10.84.9 Malaysia9.4107.3-7.46.48.9 South Korea8.174.7-6.99.58.5 Thailand105.9-1.4-10.54.44.8

5. Currency Crisis Outside of Malaysia, other three countries held large amounts of $-denominated short term debt With no hedging, this led to sharp depreciation Domestic banks exposed to both currency risk and credit risk

6. Unique Crises Thailand: FBAR Indonesia: Suharto Korea: faster recovery from larger IMF infusions Malaysia: Capital outflow restrictions

7. Policy Response Domestic Interest Rates Bank Rescues Keynesian Expansion

8. Conclusion Key factor: run-up in investment, “hard landing” after Recession was not inevitable, but events in Thailand accelerated region-wide crisis