Asian Financial Crisis

SUBJECT: The dynamics of economic turmoil in East Asia.

SIGNIFICANCE: The economic crisis in East Asia has been impelled by volatile capital flows and industrial overcapacity, with the latter driving the former in a self- reinforcing vicious cycle.

ANALYSIS: That there is financial and economic turmoil in the world is beyond question. However, it is not necessarily the case that the countries and regions involved are either suffering from similar problems or that they are subject to a general contagion. Read the rest of this entry »

SUBJECT: The prospective role of the Euro in East Asia.

SIGNIFICANCE: In recent months, the balance of East Asian official and investor sentiment has changed in favour of the Euro.

ANALYSIS: Some 18 months ago, the majority of East Asian businesses and governments were either ignoring the approach of the launch of the Euro on January 1, 1999, or assuming that it would be beset by a series of problems. Moreover, reflecting the widely held concern that the Euro would likely emerge as a significantly weaker currency than the DM (which represents the principal European currency held by East Asian central banks), several central bank officials in the region noted that governments would likely move away from holding European currencies as part of their foreign exchange reserves. Read the rest of this entry »

There is a strong possibility that all of East Asia except perhaps Indonesia will move out of the crisis of 1997-98 in course of a couple of years (Table 9). Does that mean the resumption of the East Asian economic miracle? The broader issue of the medium and long-term future of East Asian economies is addressed in this and the next section.

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